CPNE filed its annual 10k and released its audited year end numbers late yesterday. The market certainly likes the news as the stock is enjoying another upday after the massive three day swoon. If you jumped in earlier this week when I called it, you did yourself a favor here in the early going.
I am more convinced the sell off was not precipitated by 144 sellers actually making sales- it was precipitated by traders seeing the filings, then wholesale dumping the stock – trying to get out ahead of a perceived influx of supply. They were selling stupid. Here’s what they don’t know- those 144 investors are close to the company, and they, like many of us, suspect the company is doing extremely well and remains undervalued.
Here’s what I learned from a quick run through the 10K.
From the end of Q3 to year’s end the number I&O only went down by 100,000- therefore, they didn’t buy back much stock in the open market.
They made almost as much money in Q4 as they had for the entire rest of the year- They generated $4 million in Q4, and were standing at $4.75million up until then for the first three quarters.
Therefore- they are now making $1.25 million per month vs the $1 million they were previously making.
Membership revs for the full year were 81% of sales- 78% for the first three quarters- therefore, there is not much evidence of growth of sales outside of the monthly fees as a percentage of the whole- a minor negative.
EPS was $.09 through the first 9 months- $.20 for the full year. They merely doubled the year’s EPS in Q4. Outstanding. Here’s this past month’s chart:
I don’t mind tooting my horn a bit about the call I made earlier this week. I published an edition with an emphatic buy where you see the circle, and those who jumped in are doing very well. You never know when a low risk opportunity is going to come along.
From here, the larger market will probably grind around for a bit, and perhaps sell off again. This “rebooting” of the market is just what we needed.
I expect this stock to participate in the next market rally, and trade up into the next earnings release- It should do well later in March and in April barring a cataclysmic market. I have said this before, and I will say it again- I have read and heard all the rhetoric coming out of this company, and I believe Q1 will be strong.
If it can match Q4, CPNE could earn $.40 EPS this year. You tell me what the price should be.
Comments and questions are welcome.
How do you rule out the possibility that Q4 results may have been a seasonal or year-end spike rather than an overall increase in sales (ie, membership revenue percentage of revenue)
Editor: Seasonally, Q1 is one of their best, so I making an assumption- it’s based on disclosure the company has put out as well. However, I could simply be wrong, and Q4 could have been an aberration. That’s 4 quarters in a row, so the company is doing something right. I don’t rule it out. I just believe the odds are against it.
What do you think the chances are of the stock price dropping back down to the 31 cent range?, seems like the volume has really dropped off,
Thanks
Editor: Are you taking about $2.31? Of course, it is a possibility in this market. If and when we get there, I will have comments. In the meantime, my SSL is $2.25- just be disciplined. If you are worried, sell it if it gets there.
6 DOLLARS!
Editor: Hope so.
“Membership revs for the full year were 81% of sales- 78% for the first three quarters- therefore, there is not much evidence of growth of sales outside of the monthly fees as a percentage of the whole- a minor negative.”
I don’t think this is a minor negative. What happens with they run out of people to sell to? And so far they have not revealed their retention rate, which is absolutely crucial to long term growth. It is possible that in their second quarter we will see a serious slackening of new signups while older signups do not re-up. That would make this a flash in the pan. So, given the above, it would behoove stockholders to stay nimble UNLESS they reveal the retention rate and it is good or better.
Paul
Editor: Thank you for putting this out and reminding everyone. That is “the rub” as they say. You have very succinctly pointed out the major negative with this company. Retention rate improvement is what got them the great year in ’06, but is there really a value proposition here for the consumer? Hence my SSL at $2.25. If it trades much below there you own this one at your own peril.
So what’s your take on the technicals for Planet not reacting to the good news. I picked up 10,000 @ $2.53 just last week as it looked like it was going to break through the $3 line again. But it’s quite disappointing to see the continued weakness.
Editor: Nothing has changed. If you look at the left hand menu bar at my home page, you will note I still have an SSL of $2.25. If the stock trades that low, I will be re evaluating at the very least, and accelerating liquidating my position. For me personally, it will be a game time call. Right now, there is nothing to think about. On the plus side- it is not selling off on a lot of volume, and I really want to hang in there for Q1 numbers.
I find it interesting that new announcement has been made about membership information for this month.
Announcements in the past have been around the 5th of the month and it is already the 7th.
What do you think this indicates ?
Editor: I don’t make anything of it. If they don’t announce at all, perhaps they don’t have good news. They have just completed a 10K which is a massive job, so they may be getting caught up.
just wondering if you stuck to your stop loss of 2.25?
I did… i got over 125% out of this… see if i can get in lower.
Editor: This stock is very sloppy right now- all sellers- no buyers. I am going to start selling a little more aggressively if it doesn’t start to behave better. Don’t like the action at all. So far, I haven’t sold any in the last week or so. If you are a trader, you almost to reduce your exposure to some extent.
So why the recent selling. Your SSL is 2.25. I honestly did not think it would drop 30% from its high. Whats up editor with this stock?
Editor: This stock is very sloppy right now- all sellers- no buyers. I am going to start selling a little more aggressively if it doesn’t start to behave better. Don’t like the action at all. So far, I haven’t sold any in the last week or so. If you are a trader, you almost to reduce your exposure to some extent.
Can you speculate why the stock is trading below the SSL level. Is it loosing investor confidence or is this simply certain investors cashing in on their previous gains.
Thanks
Editor: I think the stock is simply very sloppy right now. Hopefully, as it closes in on Q1 numbers it will firm up.
the big selloff is on. I hit my stop loss of 2.22. My question is what now? If it goes below $2 when does it stop? Is there a safe entry point or do we have wait for the dust to settle?
Editor: I will be looking at that when the time comes.
It went down from 3.50 to 2.07. Is it a correction or any bad news?
Editor: I don’t know- that’s why you set an SSL at $2.25- see what happens now- could be a great buy or there could be problems we don’t know about.
What would be the necessary trading environment or scenario before a potential split occurs for this stock.
Editor: There won’t be a split here. No way- perhaps a reverse split to get the price over $4 and go to the NASDAQ.
The absence of news in CPNE is killing us slowly. I have a hypothesis: that the Tuesday meltdown of last week has fundamentally changed the mental environment towards our kinds of stocks, microcaps. People are fleeing to Value or Cash. Thus, the very nice environment we have enjoyed may have evaporated and it will take real, significant news to push the price of such stocks as CPNE, TTGL, EFSF, etc., back upward. They will not go up on hope alone. Just a hypothesis. I exited all my CPNE today at a nice profit (but not the great profit I had when it was over $3). I thank you for that nice profit, however.
Paul
Editor: Yes, the microcap switch is off for the time being. However, I don’t believe this is going to be last May again. I believe we are close to investors coming back in short order.
Dear Editor, what do you make of the current swoon? If Q1 numbers are what we expect, this is a $4.00 in any market, and price IS the great equalizer, no?
Editor: I just think the stock is very sloppy right now- all sellers, and no buyers. I don’t know if there is anything wrong- this is why you set your SSL at $2.25 and simply sell if you are a trader. You can always buy it back if and when it firms up.
Where is a good place to look for the 144 filings? I went to the sec.gov website, but didn’t find anything really recent. Maybe my searching was off. Any help would be appreciated. Thanks.
Editor:
http://www.sec.gov/cgi-bin/browse-edgar?company=commerce+planet&CIK=&filenum=&State=&SIC=&owner=include&action=getcompany
Looks like it has dropped through your SSL, what are your thoughts on CPNE as we move forward. I had a sell order that filled before it topped out, but now feel pretty good about it! Discipline, I gotta keep that in mind. Thanks, Mike
Editor: Very sloppy right now- all sellers and no buyers. We’ll see when it wants to change.
I’m interested to hear your take. This stock tanked on heavy volume, straight through strong support levels and closed below the 50 day MA. Is there something I missed. Seems like smart money might know something here.
Editor: There’s nothing to miss. My SSL was $2.25- I don’t know why it is so sloppy. All that matters is that it is. You should have sold it if are a trader, and looking to go back it when it behaves better.
I presume you are now recommending selling CPNE since it has decisively penetrated the SSL of $2.25 and there is a lack of contrary news? I bailed at $2.20 on Friday. Sorry to have missed something nearer the top of the rise above $3.00 but still made a good profit.
BD
Editor: I’m not recommending selling. I am saying that if you are a trader- not a long term investor, and you are concerned about preservation of capital, you should probably be out looking to get back in on the next leg up, if there is one.
Your position about Commerce Planet seems quite different than that held 2 weeks ago. What has changed? Should we be concerned about what might be happening in the company? Are your concerns based just on trends in the market?
Editor: The technical picture of the stock. Nothing has changed about the company.
Todays market was terrible and not much better for CPNE.
I cannot think of a better time than for management to buy back some shares at these prices.
When do they report Q1?
I am standing firm at the moment as I see no changes in the business model. As a matter of fact I think it is time to add to my position!
Long & Strong
Scott
Editor: There is only one very minor negative that has been brought to my attention- they didn’t report the number of new subscribers in February. Other than that, I have no indication that Q1 won’t be very robust. If history repeats itself, they will be out around the end of April. If history repeats itself, the stock will trade up before the earnings release. If you are a long term investor, the stock is a great buy right now, assuming they continue to deliver the numbers.
What is wrong with this Stock! I am vexed, truly truly vexed. Are they possibly going to look at a stock reversal to shoot their stock price to $4 to get listed? I don’t know what I am talking about. But this doesn’t make sense
Editor: If you use the SSL at $2.25 as suggested, it doesn’t have to make sense. It is what it is. Whether it is falling apart because the stock is simply sloppy right now in a market where investors are afraid, or the company has made a turn for the worse with no disclosure, the result is the same. If you have sold you are in cash, and ready to buy back when it firms. If you haven’t, you are a long term investor and you just have to wait for the fundamentals to drive the price back up, or take a turn for the worse and give you the signal to get out. I believe Q1 will be great, and I am waiting for a kick back up.
boy.. it got worse today… who wouldve thought we’d EVER see below $2 again. After the struggle we had to get over it. Thank you for the 2.25 stop loss suggestion.
Still think the company has things running on all 12 twelve cylinders really well. Would like to get in again, but the “catch the falling knife” game i find hard to play…
Editor: Seems to be stabilizing in the $2 range. If it doesn’t want to fall apart in another down market, probably a good time to buy into the next earnings release. I would let it prove it has support at this level for a bit.
Well, I guess its a buy now. Lets hope Q1 is as good as we expect it to be. Should I be bullish. 4 dollars by the end of the year still!
Editor: Will be publishing a BLOG with some thoughts today. Tough call.
I noticed a distirbing event when I sold one block of stock (2500 shares). The trade was exceuted intotal within a second at the limit price I specified. This would be considered usual but it hasn’t been my experience in the microcap market with a stock that was in the middle of a fall like CPNE. Other trades with other microcaps taking several seconds to sometimes minutes to exceute during the same type of scenario. This lead me to wonder if there isn’t something going on? My knee-jerk reaction was a large investor (I cannot be the only one this happened to) was cashing in their short position. Even when a short is covering it still takes time to execute a sell trade. I am not trying to start a conspiricy theory on this but what is your opinion (or is this typical)?
Editor: It is not unusual with stocks that are very liquid. My guess- it was probably some market maker who was short, and wanted to close the day flat- the stock was probably looking a little higher that day, and the guy wanted out. On the other hand- there could be a big buyer looking to accumulate at these absurdly low levels. Hard to say- however, I don’t believe it is indicative of much. When the stock was hot, it would open lower every day, and close higher in the last hour’s trading. That was a definite tip off the stock was under serious accumulation.
I actually haven’t read the book that commerce planet released right now. But what exactly does this mean? in lamen terms.
Editor: Please read BLOG posting again.