|Written by GSCR Staff
|Tuesday, 30 April 2013 05:50
Good Morning. We are staying with our recommended buying strategy from our Goldman Guide for early May in bio-tech, leisure stocks, automotive, and casual dining.
Today’s stock is along the leisure theme, but with a twist. The seasonal play here is traditionally to stocks aligned with summer vacation and the great outdoors. LeapFrog Enterprises, Inc. (NYSE – LF - $8.96) is a twist on this theme with ‘summer school’ in mind.
LeapFrog offers its flagship LeapPad and LeapPad2 tablets for children ages 3 to 9. Both of these are award winning products from several children’s educational publications. The LeapPad is the top seller in its class. The Leapster products are handheld gaming devices designed to aid in reading in children ages 4 to 8. The Company also provides content for its products with cartridges, eBooks, and apps for learning phonics, reading, writing, and math. The TouchMagic line are toys designed to encourage learning through touch pad technology. The Company’s products are used in 45 different countries and have been used in over 100,000 US classrooms. Clearly LeapFrog, is designed to give kids the early jump on school and give parents a ‘fun’ way to deliver education over the summertime months.
Not only is LF a good leisure play, but also is positioned well in the growing tablet market. The tech play here is that PC/keypad is on a broad decline while the tablet/touch market growing exponentially. The overall growth rate for the tablet sector is forecast for over 23% over the next two years annually.
Top line growth increased 27% from 2011 to 2012 for LF. Forecasts are for the growth to continue from $581 million actual in 2012 to $624 million in 2013. EPS is forecast at $0.65 in 2013 and $0.75 in 2014, giving the stock a FY13 EPS multiple below the S&P 500 average. Thus, we view it as a real value growth pick.
The combination of strong revenue and EPS growth and an over the top bullish chart from the technical perspective should help LF leap to $11.50 by the start of 3Q13.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com