The Planet offered up some preliminary Q1 numbers post close today, and I’m guessing the results are going to allay investor fears and shift the focus again on how undervalued this situation continues to be.
CPNE disclosed it will deliver $13 million in revs in Q1. Until I see the actual financial statement, I can’t really comment on whether it is a strong number- remember, they have subsidiaries that do business with each other, so I’ll have to see the treatment to comment. Also, the revenue mix of their three subsidiaries will be important- Are the other two divisions growing? or are the majority of the revenues still coming from subscriptions? Investors would probably like to see some growth in the other two divisions.
Revenues aside, profits are profits- and with this company profits are cash. The bottom line- they made $4.6 million in cash, and will be able to report $4.1 million in profits after $500k in non-cash expenses. These guys are generating $1.5 million per month in excess cash flow. Outstanding.
Here’s another mystery- I don’t know how many shares will be I&O when they report. Some will be gone from the last financials they have bought back $1 million worth of stock as of the last disclosure.
They could have added stock or warrants with the new advisory relationships they have. I’m guessing the EPS will come in around $.10. If they can just keep up the pace, they will end up with $.40 per share in earnings this year.
On one issue there can be no doubt- CPNE has proven itself for another quarter, now making it five in a row. I wonder when investors are going to start doubting the company and just buy the stock.
It will be interesting to see what happens tomorrow to the price. On the basis of corporate performance, there is really no reason to sell the stock, and lots of reasons to buy. That’s what makes sense. As we know, the market doesn’t always make sense.
To Mike Hill and all the guys: Keep up the great work- outstanding performance again. Let’s hope the market gets its head out of its proverbial hind end and prices this one where it belongs.
Comments and questions are welcome.
PS- I’ll bet when they file the actual 10Q, the numbers come out even better than preliminary results.
Great quarter…..I agree that this company is still undervalued by plenty, and should be listed on a major exchange. How many OTC stocks (or tech stocks for that matter) can not only turn a profit, but continue to increase that profit quarter after quarter? To top it off, CPNE has no debt and is actually buying back shares.
any chance we gonna see the company make projections for the rest of the year, if not Q2? I imagine this company must have internal growth targets that they are aiming for.
Editor: I have heard it’s a possibility, but I can’t say for sure.
I felt that today, before the news, that this was
a good buy. The price was holding around 2 and didn’t show alot of selling out. I would fully expect that after the news that in the AM the price will gap up, particularly if there is heavy buying. In other words ye haw.
Editor: Seems to be starting out ok- perhaps a little heavy for what I would like to see.
I agree with your assessment. It’s important to keep in mind this company generates cash profits, they do not need to invest in growing inventory and accounts receivable as revenue grows. Very few companies have this strong cash operating leverage. They will absorb the remaining NOL this quarter. So future quarters will be subject to income tax. This will reduce future eps by the tax rate, probably around 30% going forward. However if they utilize the cash income to raise the share repurchase, and/or make accretive acquisitions, it will lessen the tax impact to eps. They are on track to qualify for listing on an exchange within the next 12 months.
Editor: I wonder how long it will take for this stock to be reasonably valued. I guess that’s the big question.
How big is the float. My brokerage say 47.3 million and yet the if I use reverse math (by calculating what an insider sold vs. his percentage of their stake) based on their recent filings it looks like 52 million.
Editor: I will provide some commentary on that issue when they file the 10Q and I can see the numbers. Nice email address. Loved and hated the movie. It was like a train wreck- not unlike Borat.
unbelievable! price is @ yesterday’s close, who is selling this stock and WHY?!?
Editor: See comments in today’s edition.
According to the preliminary Q1 report that the company offered up yesterday, there were many ‘expect’ words inside. Dose the company make such a low-key mood deliberately since they still need to repurchase other $1 M shares in the future?
Editor: It’s probably more related to the fact that they are in registration on the 4.8 million shares Feinberg’s fund bought. When you’re in registration, you’re not supposed to talk about the future.
Oh man, Classic CPNE expectation, classic market results. I think they would be better off not posting anything from now on. Buy the shares and go private.
Editor: Not a bad idea. If the market won’t pay a reasonable price for this company, they should just buy themselves.
So much for a great quarter! Todays activity looks so much like the last ” buy the rumor sell on news” which is not fair to CPNE. Management must focus on getting the institutional investors on board, offer its shareholders more specific news, and buy back more shares than what has been announced (2M)and focus the next six months. I continue to believe in this company based upon its consistency but there must be a new strategy management must
Editor: The stock needs more institutional sponsorship. See my weekend edition for more comments.
Another questionable day. Stock closed 4/12 at $2.10 opened 4/13 at $2.28, hit a fast high PPS of $2.37 right after the market opened then continually spiraled down hill all day to close at $1.91. It moves up on no news and declines on a good quarterly anticipated report. Beats me how to play it. As you said, “the market doesn’t always make sense”. How true.
Thank you.
Editor: See the weekend edition for my comments. Just ridiculous.
I was not surprised at the initial response of the market to the preliminary earnings announcement but was after watching it steadily drop in price. Any idea what the market may be reading into this that isn’t apparent?
Editor: That’s what I would like people to tell me. I can’t see any reason to sell this stock unless you need the money for something else. Comments in this weekend’s edition.
In light of CPNE’s perfomance of late, I am left with several questions. As a novice stock trader, I don’t know exactly how to determine a “Fair Value Estimate” by the numbers, and adding the effect of “News” and Financial Reports puts my haed in a spin. I’ve seen several companies report great results – and yet their stocks tank! How do you determine your fair market value and your “target”? By the way, I must trust you because I am vested in serveral of your highlighted stock picks. Thank you!
Michael
Editor: Michael- there are several metrics for determining the value, or what the value of stock should or could be. The first and no doubt most important is earnings- or profits. Does the company make money?- If so, how much? and where should the stock be? The popular earnings metric is “PE Ratio”- the Price to earnings ratio. For the companies who trade in the S&P 500, the average PE is about 16- another words, the stocks trade at 16 times their profits per share. These are slow growth behemoths- the higher the growth, generally the higher the PE- in the case of CPNE, it looks like they will earn $.40 per share this year. If the stock traded at a PE of 16, it would be a $6.40 stock ($.40 x 16). Hence, a lot of investors are wondering why it doesn’t trade higher. There are many other methods for determining value, but that would be a whole book. This will have to do for now on CPNE.
Is this website a CPNE turnkey website? It’s great!
Editor: No- we were around long before they were, and have our own systems.
Their investor presentation is now available for viewing. They reported cash of $6MM at quarter end, and net income of $3.7MM. Please forward the following request to managment if you feel it is appropriate. When they report quarter end, report quarter over quarter results. Comparing results to the same quarter prior year is meaningless to me since they were in the beginning stages of excuting the present business model a year ago. It appears to me consolidated revenue rose 47%, and operating income 33% over the prior quarter. That is what I’m interested in knowing. As a shareholder, I would appreciate the company holding a conference call when earnings are announced or providing forward guidance in their quarterly PR. They provide little visibility into the future. Investors buy based on future expectations. It would help if they indicated what their plans are going forward in addition to expanding the B to B business model. This company will soon have over 50% of their assets in cash. It would be nice to give shareholders an indication of what their plans are for utilizing excess cash. Thank you.
Editor: If they are going to grow up and become a real player in the market, they need to make the exact kinds of changes you suggest.
When do you expect the 10Q? Thanks.
Lewis
Editor: Probably in the next week or two.
I have two basic questions that could help satisify the issue of stock price.
As a business model of attracting subscribers and cross selling, we know they have been successful in attracting subscribers. The question then arises what about the retention rate? After we know the retention rate then how about the ratio of cross sell.
As an investor, the question I try to answer is the value of the company. Without the retention rate and cross sell ratio, which in my opinion should be addressed in any corporate report. This in my mind would allow us to project the future value and there by the stock price. Without that information one of the best methods is book value (so keep piling on the cash). If their competition is Amazom.com then we need to know this information if we are to belive the stock price can skyrocket to a PE miltiple of 100.
In my opinion, the stock price may be where it is because we know what the company has done not what its projected success may be in the future.
On the positive note, I cannot believe that a sophisticated investor would invest $9.1M without knowing that information.
Editor: Hence, this idea remains a puzzle. They have never been willing to talk about retention rates, which makes investors assume it is poor. However, they keep generating the numbers- I don’t believe the metric of a comparison to Amazon will ever apply to this company unless they really evolve the business in a different direction. In short- I believe the market sees them as a flash in the pan- as soon as people are no longer willing to fork over $10 per month for a service they don’t really use, the game will be over. However, there are a number of other companies in this business doing hundreds of millions in annual revs, and have been doing so for many years. If there were more disclosure and more analyst/institutional following, it would certainly probably trade better.
It’s consolidating nicely at 1.80 about 15 percent above the 200 DMA (I have to have a positive outlook somewhere). I think that it is a nice entry point at this moment of the game. The stock is not selling off, the light volume would indicate that just no buyers are there hitting the ask. I think that what has happened is due to a lack of information frankly, granted that the recent PR was a prelim ER. I think some question on share count exists now, and forward looking guidance is not necessarily a problem but it contributes (I’ve seen plenty of low valuation stocks offer great ER’s with no guidance and those stocks rocket on great ER, so guidance isn’t absolutely neccessary but it contributes to the lack of info issue) . I believe that the final numbers will be released sometime at the beginning of May (the 1st or 2nd if we look at past history) and I think that wek will be a wonderful week for CPNEr’s. I’m expecting a EPS of 8 cents for the quarter.
Can you forward our concerns to Mr. Hill?
Nacho
Editor: Probably a good buy today into the actual earnings release. I have been sending concerns on to Mike Hill on a regular basis. I believe they need to provide more ongoing disclosure about what’s going on if they are ever going to get a reasonable valuation.