US Energy Making Valiant, Failed Effort To Move Up

US Energy, the Rodney Dangerfield of the alternative fuels microcap world, made a valiant effort to break out today on a strong quarterly earnings report.

As I write this BLOG at 10:30 Pacific, the stock has already traded 1.1 million shares and tried to break out. It surged to $.14, but unfortunately as has been the consistent pattern with this stock, sellers appeared to sabotage the price movement of the volume surge.

The company reported top line growth of 217% above Q3 of ’05- they approached the $.5 million mark in revenues, and they made a gross profit of $200k, which suggests some pretty good margins.

Here’s the chart and some thoughts:

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You can see the stock made a nice move up today on big volume, but has since turned around and is near the low of the day. This is a pattern which continues to repeat itself with this stock.

In the press release, USEI states there is an in depth discussion of the progress in each of their major projects in their 10Q- I can’t comment because the 10Q has not been filed as of yet. As soon as it is, read it over and share some thoughts.

USEI is now in a position of effect a reverse split if they so choose. I believe it is highly likely the company will engage in a reverse split, but unlike PhotoChannel, I don’t believe it will be productive for the shareholders. I believe this one will have the stock chasing to new all time lows. Too bad, because the company is going to rock in ’07.

Reverse or no, the market will still have to deal with a massive supply of stock. On the plus side, in ’07 the company will generate some real numbers, and who knows what new business might come in.

Bottom line- My $.12 SSL still stands for traders. For long term investors, corporate developments are very strong.

If the stock craters after a reverse split, it could be the oversold bargain basement deal for 2006 or early 2007. Long term, I still love it.

Comments and questions are welcome.

The Mailman Cometh

If you jumped into shares of MAIL which I just introduced this past weekend, you are having a very good day.

The stock opened yesterday morning at $7.22, and is currently trading at $7.90 thanks to the predicted strong Q3 earnings release pre open today.

The company announced a 67% increase in revenues of Q3 ’05 to $2.6 million, and a doubling of profits to $600k, or $.06 in EPS. On non-cash expense took the earnings down from $700k.

Just as I stated in the original presentation, this company is rapidly learning to monetize the massive number of eyeballs using their very clever email service through both subscription and advertising revenues.

The stock trading over $7.50 marks the first time this one has traded above its IPO price of $7.50 since last April.

Here’s the current chart as of 7:30 Pacific on earnings day:

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Note the breakaway gap I circled on today’s earnings release. While this stock might work higher in the short term, I believe in waiting to see if the gap wants to be filled before taking any further position.

A gap on a chart is like a vacuum in nature- nature abhors a vacuum and wants to fill it. Look for the stock to come back down and fill this gap, at which point it could and should power higher. Of course, it could power higher or enter into a period of extended sideways trading, but I like the odds of a pullback.

This is another example of a dot bomb that Wall Street had shunned turning dot profitable and powering up. PNWIF and CPNE are doing likewise. This seems to be a sweet spot for ideas right now.

One thing is for certain- the trend is strong in this company. Watch for additional anaylst coverage to start to pop up as this company improves. There is only one analyst following the company now.

Comments and questions are welcome.

CPNE Rebounding Admirably

Post earnings CPNE blew off in a scary fashion, but with the perspective of a week in the rear view mirror things are looking considerably rosier.

The sell off was a classic “buy the rumor, sell the news” trading pattern, no doubt exacerbated by the shares early financiers have been consistently pumping into the market.

This is not necessarily a bad thing. These guys are making a lot of money, but they also took a lot of risk before the company was successful. Now- three years later- they are cashing in. This is the way it is with all developmental companies- old money gets out and new gets in as the fundamentals justify higher levels. Without them, you might have to pay $3.50 for this stock right now.

As I wrote post earnings- you should only hold the stock if you were prepared to hold down to about $1- we got to $1.18 on Tuesday very briefly. Bargain hunters swooped in.

Here’s a pretty complex chart from Friday’s post close, and it sure looks good. It suggests a couple of scenarios.

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First, there have been two major blowoffs in the stock in the last two months- both of which were followed by strong rallies. Note the lows are getting higher with each successive blow out. This suggests these violent sell offs need to be bought.

Secondly,the stock broke above a little mini downtrend line from this past week’s action. That’s a big short term positive. If the stock can trade up just a few more cents, we will have a “double repo” condition- also known as a traders “bread and butter” trade.

If the stock can just find its way about the $1.48 level- a move above the Dinapoli 3×3 moving average, it could break out. Traders look for this pattern all the time. It has to happen within 8 trading bars of the last time it dropped down below the 3×3- in this case it was Tuesday.

Despite the miserable week after what should have been a great earnings move, the stock is behaving like a champ. Last quarter’s earnings justify a much higher stock price, and if the trend continues it should get there sooner or later.

Comments and questions are welcome.

CPNE Meltdown- Look Out Below

Yesterday’s poor action post earnings release in CPNE has cast the die for a correction in this stock in my view. Despite being one hell of a value proposition based on sales and earnings, yesterday’s negative trading in the stock on earnings release day has set the stage for a major correction.

If you bought this stock a couple weeks ago when it collapsed into the $1 range, in my view you will have another shot to do it all over again.

If you want the most succinct version of the negative side of the story in the case of CPNE, here are the comments of one reader:

“I think your Part II is right, especially about how the market may be signaling a corporate problem. These numbers are great, but only in the sense that the return to early chain-letter and pyramid investors are great. Have you visited their sites? Tried to escape from them? Priced their specials against Amazon? Considered that the retail site competes with the stores created by customers of its wholesale site, at the same price?

The business about the intercompany revenues is upsetting because itís very clear that you canít count the money you spend on your vertically integrated cost centers. If these subs were third parties, the expense would count, but not the revenue; since they own their ďvendor,Ē they can count neither, but the reduction in expense generates a return on the investment in the subs.

Any company can claim that it COULD outsource something and so what it spends on that function ought to be counted as revenue. But thatís not whatís done.

And CPNE has not just counted the intercompany revenue, it has made it part of a headline, burying the real thing so deeply in the PR that you missed it on the first read. That sort of overreaching is never an accident – and it is most often a powerful indication of the character of the people behind it. I sold my shares this morning, not because I was waiting for the event, but because the PR, with its inflated numbers and effusive self-congratulation, turned my stomach.

This stock may well go higher as bigger fools buy in, but these guys treat their shareholders as customers of their stock, not as partners in their business. And that stinks.”

This was contributed by one reader in the comment section of the BLOG I posted just as the numbers came out on Monday morning. I agree with some of his comments- particularly those related to the presentation in the press release. I wanted everyone to see the negative side of the story.
The problem here is quite simple: There are more sellers than buyers. Some early investors are probably trying to take money off the table in a market that doesn’t have enough volume to support their appetite for liquidity.

As such, it is my personal view that this stock is now going to go back to $1. My advice- if you are not prepared to hold this stock to much lower levels, sell it now.

I can’t be sure the stock will trade down there. It certainly offers a compelling value at these levels. However, technically it looks like odds are it is headed there.

Here’s today’s chart at about 11:00AM Pacific:

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As you can see, the stock has broken below my blue support line, and therefore I personally believe a trip back to $1 is in the cards. If and when it gets there, it will be one hell of a buy.
I don’t know for sure it is going there. I just feel if you are going to hold this stock thanks to the outstanding fundamentals, you need to be prepared psychologically for the possibility of it happening.

Comments and questions are welcome.

Santa Arrives Early For Planet Shareholders

I’m dreaming of a Green Christmas- Green for profits- and there is little doubt Christmas is coming early this year with the numbers Commerce Planet delivered in Q3.
In truth- I don’t know what the heck these guys are doing to generate this kind of cash flow, but it is sure working. Subscriber loyalty must be at some kind of new all time high for the company to generate over $6 million in subscription revenue. That equates to something like 200,000 paying members monthly.

Here’s the totals: $9.7 million in combined revenues, equating to $3.1 million in profits: or $.07 per share.

As the company points out in its press release (which is quite unusual)- the PE ratio of the stock on an annualized $.28 per share in earnings is 5.7- this held against an industry average of 26.2- therefore, if the company can simply maintain its current level of profitability and the stock eventually trades at the industry average, your price target is $7.33.

There is one fly in the ointment: There is a discrepency I can’t quite figure out- The press release says the company generated $9.7 million in revs and $3.1 million in net profits. The 10Q says the company generated $7.6 million in revs and $3.1 million in profits. I will try to get to the bottom of this.

So- ask me now if the stock will trade over $2 this year? I believe the answer is yes- perhaps very soon.
Here’s a longer term chart:

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This is a weekly chart going back the entire trading history of the stock. All I want for Christmas is the stock trading at a new all time high- that’s all I ask- it could happen today. We’ll see where we go from there.

I’ll publish an edition later today with more details. If you don’t own this stock by now, you can’t say you didn’t have the information.

As far as any futher trading goes- if you buy it today, you should still probably do very well. Comments in a full edition later today.

Comments and questions are welcome.

PhotoChannel Reverse FUBAR- To Be Rectified Tomorrow-Symbol To Change

Special News Flash- Just got this 411 directly from the company at 11:25 Pacific: PHCHF will be trading tomorrow under a new symbol on the US Bulletin Board- the new symbols are as follows: PNWIF on the US bulletin board, and PN on the TSX- effective tomorrow morning.

The PhotoChannel reverse split did not go as planned today- it was FUBAR- an acronym widely used in military circles- it stands for (decorum prevents me from using the full words) Fu**ed Up Beyond All Recognition.

The stock opened for trading in Canada today under new symbol PN, but was halted for trading shortly thereafter when the powers at be learned the stock was not trading post reverse split on the US Bulletin Board. It continues to trade pre reverse split in the US.
In the meantime, PhotoChannel issued a press release pre open this AM which gives investors a glimpse into the health of the company, which is better than it has ever been in the 10 year history.

The company disclosed that over the summer months their business virtually tripled over where they were during the summer months of the previous year.

In addition, they noted the $2 million they currently have in the bank was sufficient capital to prevent them from going to the capital markets for additional financings. Add this to the mix- we are entering the seasonally strongest period of the year for Photofinishing, and 5,000 CVS location are now hooked up and functional. Upload your images to the web site- stop by your local pharmacy in one hour and pick up your prints.

On this news the stock is trading very well stateside- here’s a chart:

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As you can see, the stock was trying for a new multi year high today, but has since backed off a bit.

I would not be a buyer today- I would wait and see what happens after this mess is sorted out. We’ll have another look tomorrow post reverse split in both markets. I wouldn’t be surprised to see today’s gains hold post reverse and set us up for a new multi year high.

Comments and questions are welcome.