PhotoChannel is trading to a new multi year high, and the highest level the stock has seen since February of 2001 when the dot coms turned into dot bombs.
My price target of $4 stands for the time being, but the stock may have legs beyond that level.
There are a limited number of pure plays in the digital photo finishing space- really only 2- Shutterfly (NASDAQ: SFLY)- last year’s IPO at $15 sporting a market cap of $333 million at about $14 (one point below the IPO price), and Photochannel- (OTC BB: PNWIF).
PNWIF has about 30 million shares I&O on a fully diluted basis, so at the current $3.30 level the market is saying the company is worth just south of $100 million.
PNWIF is a Canadian company, and trades under the symbol PN on the TSX as well. Since they are primarily a Canadian reporting company, their rules for disclosing financials are a little different. In the US they would have had to file the year end (September year end) by the end of December. In Canada, it extends to the end of January.
Year end numbers are due out any day, and within several weeks we should also see the December quarterly numbers, which I believe are going to be quite extraordinary.
Fund managers are embracing PNWIF as a value as compared to SFLY. Many, including myself, believe the PWNIF business model is more compelling than SFLY.
SFLY is in the mail order business. You upload your digital photos to their site, and they process and send you prints in the mail.
PNWIF on the other hand simply provides the online back end interface for stores. Consumers upload their photos, order prints, and pick them up in their local CVS, WalMart, Costco, etc. PNWIF collects about $.02 per print.
PNWIF does not have the burden of customer acquistion or infrastructure costs for photo processing. They simply take the order.
Therefore, when the time comes to compare SFLY to PNWIF, you have to look at the gross profit numbers and the net numbers.
Here’s the current chart going way back just for fun:
As you can see from the blue line that represents today’s high, PNWIF hasn’t seen this levels since 2001- six years ago.
Who’s says reverse splits are bad? They are great when used for the right reasons.
I believe this stock is now trading up in anticipation of numbers- not the year end through September of 2006- but their fiscal Q1- Oct to Dec of ’06.
The stock will probably continue to trade well up until those numbers come out, then we will see where they are. $4 remains my short term target, but Q1 numbers could result in an adjustment higher.
You should be doing very well in this stock as I first brought it to your attention at $.18 prior to the 10 for 1 reverse- or the equivalent of $1.80. Therefore, we are now up 83%.
Comments and questions are welcome.
Why hasn’t PhotoChannel disclosed their new account with Kmart?
Editor: My guess is that they need Kmart’s permission to do it, but haven’t received it yet. When working with these large companies, they often have to go through 10 layers of lawyers just to get permission.
Great tip
Just to let you know ticker is PN on the venture exchange in Toronto also the TSE is now known as the TSX
Editor: I was made aware of the mistake after I published the BLOG. Will correct. Thanks.
haven’t seen anything in blogs on hdy or actc since sept of 06. Have you stopped following them. At one time you were predicting a 6.00 ashre for hdy and a 3.50 for actc. do they still hold or not? I do enjoy your letter and wondered if you were taking a different position on these stocks. Thanks for the time
Editor: If you have questions are either of these companies, the appropriate place to put them would be in the respective BLOGS for each of them. In answer to your question- I still like ACTC very much for long term investors, and HDY isn’t going anywhere until they announce they are drilling a hole, especially in light of the financing they engaged in. I covered it extensively- it will create an endless supply of stock for quite some time.