Market Monitor

This top-tier game developer looks like a strong bottom fishing candidate today. We try to avoid bottom-fishing or even attempt bottom-fishing as it can be hazardous to your portfolio.  Traders like to refer to it as stepping in front of a falling knife.  Nonetheless, this situation seems pretty compelling, especially since sentiment is so overwhelmingly negative.

Zynga Corp. (NASDAQ – ZNGA - $4.97) hit a new 52-week low this morning, at $4.92, down over 10% for the day on heavy volume. Frankly, its association with Facebook (NASDAQ – FB) is killing the stock.  In fact, it is down from $12.00, which was the price of its early April 2012 secondary offering when selling shareholders sold stock.

Cowen put out a note saying that game usage is slowing.  Possible? Sure. Could prove to be a good call. We tend to think otherwise and believe that Zynga is doing fine.  Revenue grew 32% to $321M in Q1, and the number of daily active users, monthly active users, mobile users, etc. increased sharply from the year earlier. It is hard to imagine but there are nearly 300 million monthly active users of its games, and 62 million daily active users.  Non-GAAP income jumped year-over-year and was $0.06 per share.

Guidance is for $0.23-0.29 in non-GAAP EPS this year, which puts the P/E at around 20x, which is very reasonable.  Moreover, Street estimates call for $0.37 in 2013, which is a 13x multiple. Even if numbers are reduced by 15%, the stock is still attractive. The Company has roughly a billion in cash and marketable securities, and the stock is trading a little more than 2x this year’s revenue.  While it is possible the stock continues to break down below $5.00, we think that the risk/reward is in investor’s favor.

Get out your fishing rod and consider reeling some in, after it settles down.

Disclaimer:

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 the 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

Ampio Pharmaceuticals (NASDAQ – AMPE - $3.58) is on the move this morning, up 12%, following favorable clinical trial results news regarding its oral therapy to treat diabetic retinopathy.  This disease is complication of diabetes mellitus that damages the retina in the eyes and leads to blindness, and affects about 10% or 2.6M patients in the U.S.  With the positive Phase II results in hand, the Company has a Pre-IND Meeting with the FDA in July.  Management is likely to seek a partner for its next pivotal trial.

This is on the heels of a meeting to discuss its powerful anti-inflammatory drug that also completed Phase II.  Sandwiched between the two, in June, is a Pre-IND meeting to discuss its Phase III-completed premature ejaculation trial.  This therapy could be a huge market, even surpassing ED.  Already it appears that the Company may sign up a number of foreign partners to market the drug abroad, as it has one on board in Asia already.

We have to do some more work on this, but it would seem to us that having 1 drug that has completed Phase III (and is in a huge market), 2 that have finished Phase II, there is probably a lot of substance here.  Most of the drugs seem to have high safety profiles and some IP associated with their processes. At a market cap of only $114M, this could be an interesting play, with the FDA meetings as near term catalysts.

Disclaimer:

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 the 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  

I don’t like to buck the trend, especially when new highs are made on good volume.  But, in this case, we have to fire a warning shot across the bow. InnerWorkings Inc. (NASDAQ – INWK - $12.90) has been on a major tear recently.  You may find this hard to believe but people still print a lot these days.  INWK has major clients that hire it for its outsourced print procurement services such as promotional materials, direct mail, etc.

INWK is becoming a real player in the outsourced $500B printing space and the numbers for the company are on the rise. Big time.  Hence, the rise in the stock.

Revenue is expected to jump from $634M in 2011 to $793M in 2012, with EPS leaping from $0.32 to $0.43.  Moreover, big growth is expected next year as well, with EPS forecasted to reach $0.59.

The Company’s fundamentals are strong, and the chart is great.  However, in the near term, the stock looks like it is near it is short term full value, with a FY12E EPS P/E of 30 and P/E of 21x FY13E EPS.

So, the moral of the story is watch it, pick it up on dips, but don’t chase it.

Disclaimer:

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 the 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

Earlier this year, we had a favorable opinion of Sirius XM Radio Inc. (NASDAQ – SIRI - $1.91). Today we struggle to find a legitimate reason to buy the stock.  Interestingly, investors seem so caught up with the whole Liberty Media (NASDAQ - LMCA) situation that it is possible that potential issues with the core business have gone unnoticed.

While everyone seems laser-focused on the jobs numbers last week, the very disappointing new U.S. auto sales for May 2012 seem to have passed everyone by.  One of the reasons we were high on SIRI earlier in the year was the fact that U.S. auto sales were trending much better than expected.  In fact, the SAAR (Seasonally Adjusted Annual Rate) of car sales, which tends to be adjusted monthly, rose from 14.2M vehicles in January in 2012, to 15.1M vehicles in February, before declining to roughly 14.4M in both March and April.   However, the SAAR for May was a disappointing 13.8M vehicles, which was 4.8% lower than expected and an 8.6% drop from the February high.  Moreover, the poor jobs numbers, lousy stock market, and general economic concerns may weigh on consumers in the near term, negatively impacting car sales.

Clearly, SIRI’s fortunes are tied to auto sales. As a result, much has been written regarding the record 10.8 year average age of the U.S. automobile on the road as a real driver of new car sales, along with the greater availability of financing options, even for those with poor credit histories.  Plus, management has done an admirable job in extending the reach of its target market via its penetration of the pre-owned car sales market with franchised new car dealerships.  Nonetheless, we are cautious regarding its true prospects.

For example, while the number of pre-owned vehicles sold each year is roughly triple that of the new car market, a great many of the buyers of those vehicles are not likely favorable subscriber candidates for Sirius XM.  The average price tag for these vehicles remains in the $8,000+ range and most of these buyers are cost and budget conscious.

Additionally, based upon data we derived from the U.S. Department of Transportation and NIADA (National Independent Automobile Dealers Association) publications, it appears that the majority of pre-owned vehicles are sold by private parties and independent dealers, followed by the franchised and specialty dealerships.  Thus, the actual opportunity may be a challenging one in terms of both total prospects and the conversion rate.  At most new car dealerships, despite the higher profitability, pre-owned vehicle sales still tend to be materially lower in absolute number than new vehicles.

Since 2009, which was the recent bottom for both new auto sales and SIRI’s subscriber rates, car sales rose from 10.55M units sold to 12.8M units sold in 2011, a 21.3% rise.  During the same timeframe, SIRI’s subscriber base rose from 18.8M to 21.9M, a 16.5% increase.  While we do not believe that SIRI is even close to market saturation, anything but a greater than 10% rise in new car sales and material pre-owned car sales conversion/penetration make for a tough market.  Moreover, lower gas prices, while a bonus for consumers, can be a double edged sword here.  Prospective new car buyers may delay trading in their ancient gas guzzlers for new vehicles equipped with SIRI systems, negatively impacting the SAAR.

On top of our auto industry and subscriber conversion concerns, this Liberty Media mess has got to have had an effect on management, which did not need the headache.  Much has been written and speculated on this front so there is no need for a re-hash of the same material.  Suffice it to say Liberty is crushing SIRI. All investors need to know is that since Liberty made its moves and increased its ownership stake by 15%, the stock has declined by nearly 20%.  With no resolution around the corner we can only expect this issue to continue to weigh on the stock.

Disclaimer:

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 the 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  

Parametric Sound Corporation (NASDAQ – PAMT - $5.99) has been under accumulation of late and given the rising volume, along with the stock price, it appears that it will break through its 52-week high of $6.75 pretty soon.  That event may bring in greater numbers of investors.

PAMT is a very cool technology company. The Company has innovated and introduced a technology that can control the direction of sound enabling that sound to go exactly where it was intended or targeted.  That means no more vibrating speakers that transmit sound to the masses.  This is a truly personalized or targeted tool.

Since this technology has the ability to beam, focus and control sound which empowers commercial solutions that benefit from directed audio, the initial market, for which the Company is licensing the HyperSound brand, is the digital signage and pint of sale space. Other markets include kiosks, and electronic gaming (slot machines), along with computers, mobile devices, television, etc.

The Company is in the early innings of the revenue generation phase so numbers may be a little choppy.  Nonetheless, PAMT has a great deal of IP and has already begun licensing the technology to OEMs.  The applications can truly transform the audio experience for business and consumers.  We can envision a reduction in the use of headphones for computers, tablets, mobile devices, etc.  Cool stuff. 

Disclaimer:

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 the 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  

There are 2 stocks on the move today I find interesting.  One is in the midst of a serious breakout in terms of price and volume.  Still, the valuation remains attractive although the stock likely has a rise to the $4.75 level or so. The other is in the process of possibly being bought out by a group led by its Chairman, for premium to the current stock price.  If successful, investors will get a 12.5% pop from current levels.

Reed’s Inc. (NASDAQ – REED - $3.69) bills itself as the producer of the top-selling sodas in natural food markets nationwide.  As of the most recent quarter, the Company had products selling in over 12,000 natural foods markets and mainstream supermarkets.

What is cool and unique about Reed’s is its flagship, Ginger-focused beverages.  Apparently, ginger has a number of health properties and is the fastest growing spice sold in the U.S.  Ginger has been shown to treat motion sickness, aid in digestion, and is used as a cold remedy. The Company has six award-winning nonalcoholic Ginger Brews in its stable of offerings.  What makes them further unique in the beverage industry is the fact that they are brewed not manufactured.  Reed’s also uses fresh ginger, spices, and fruits in a brewing process that predates commercial soft drinks.

The Company’s revenue growth is impressive.  At last count, REED has grown quarterly sales by an average of 25% for the last 9 quarters. For 1Q12, REED recorded $6.5M in sales, a 27% rise from the same period in 2011.  In addition to introducing new products, and penetrating its existing, household name retail chain channels, the Company is rapidly deploying its products through numerous private label arrangements.  This should help buoy revenue even further in 2012.

At current levels, the stock is trading around 1.2x what we estimate could be $30M in sales this year, which is still very attractive.  The stock has hit new highs in recent days and is trading around 10x average daily volume the past few days as buyers hungry for stocks with strong numbers and new highs are in great demand.  We see no reason why the stock could not support a price of over $4.75 per share, which would equate to 1.7x our back of the envelope revenue estimate of $30M for CYE12.

Given the sudden, huge volume shift higher in conjunction with the stock price, we caution investors that this should be viewed as a trade.

The other company, Tix Corporation (NASDAQ – TIXC -$2.00), provides discount ticketing, discount dinner reservations, and branded event merchandising in the U.S.  The Chairman has delivered a proposal to the Board stating his offer to buy all the shares him and his family do not currently own, for $2.25 per share.  The Board is exploring options and reviewing the proposal. Two other buyout situations, WOLF and NOOF have been written about in these pages.  WOLF was a big success and NOOF has also worked out for shareholders, so far.  The TIXC situation, while not providing a great deal of upside, could be a nice quick return, if the deal is approved.  The current spread from the price of the offer and the current price indicates a little caution, but that is to be expected.

Disclaimer:

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 the 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

In life as in business, there are companies that you root for.  One shining example of that notion is Dynavox Inc. (NASDAQ – DVOX - $1.39).  DVOX is the leading provider of speech generating devices and symbol-adapted special education software used to assist individuals in overcoming speech, language and learning challenges.

We are not just talking about people with mild issues.  DVOX’s speech generating devices provide a voice to people who are unable to speak as a result of severe cognitive and physical limitations due to ALS, stroke, traumatic brain injury, cerebral palsy, autism, etc. Think Stephen Hawking.

The Company also produces a line of special education software which is used as a publishing and editing tool to create interactive, symbol-based educational activities and materials for special education students.

How can you not want these guys to succeed?

The stock has been a disaster. Its most recent quarterly results are filled with lower sales, charges, and meaningful long term debt.  Moreover, since the Company’s products are no longer supported under the American Recovery and Reinvestment Act, and states have their own budget issues, financial guidance has been suspended.

The stock is up sharply from its low today.  Not sure if it is what we call a dead-cat bounce following reaching a new low, or if it is the start of sustained bottom fishing.  The current estimates for fiscal 2013, which ends June 2013, calls for a 10% decline in revenue and EPS anywhere from $0.13 – $0.23.  That represents a low-end P/E of 10x next’ year’s EPS, which may be reduced.

We are rooting for these guys and most of the sellers are probably out of the stock already, meaning it might have legs to move another 15-20% higher on small volume. Stock is worth a nibble and frankly, even if things go south, vultures would come in and scoop up the company for its products anyway.

Disclaimer:

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 the 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  

The ugly market creates an opportunity to buy a stock that could have a strong performance next week. Vocus Inc. (NASDAQ – VOCS - $15.39) Vocus is a leading provider of cloud marketing software that helps businesses reach and influence buyers across social networks, online and through media. The Company offers an integrated suite that combines social marketing, search marketing, email marketing and publicity into a comprehensive solution to help businesses attract, engage and retain customers. Vocus software is used by more than 120,000 organizations worldwide.

Since the company is tangentially in the social media space, the lousy Facebook (NASDAQ – FB) IPO didn’t do it any favors. Nonetheless, the Company has had an interesting May and next week could provide investors with a quick pop.  FBR raised its rating and target on the stock to Outperform and the $18-20 range.  Plus, four insiders, including the Chairman/CEO, COO, CFO, and a Director all bought stock at these prices.  In fact the Chairman spent nearly $1 million on his purchases.

This scale does not happen often, but the stock had slid down in recent months, and has really based nicely. Next week (June 6^th) the Company is hosting an Analyst Day and its annual User’s Conference which usually means a lot of buzz will be coming from this thing.

There is virtually no debt and the Company is very profitable and throwing off a good deal of cash.  But, since the valuation is just okay, not great, we view it as good for a trade.  Remember, if 4 senior people are buying stock, that can’t be a bad thing.

Disclaimer:

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 the 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

News today regarding Leap Wireless (NASDAQ - $5.82), in our view, should be used as a trigger to buy the stock.  For the uninitiated, LEAP owns and operates Cricket Wireless, a leading pre-paid, low-cost provider of mobile services.  The Company has 5.5 million customers in the U.S. that use its network and piggyback along the Sprint network in areas of poor or limited coverage.

Much like the rest of the wireless industry, LEAP’s stock has had a really bad year.  The stock is about 20% above its 52-week low.  Higher than expected customer churn rates and lower sign-ups have hurt the stock recently.  However, today it was announced that as of June 22, Cricket will be the first prepaid wireless provider to offer the iPhone.

This is significant as it illustrates the Company’s position in the space and dovetails with its strategy to offer a variety of smartphones.  With the first-mover advantage, Cricket should benefit from new customers coming on board and using the low-cost service with a popular phone.   It may also spark existing customers to switch phones or services.  Apple (NASDAQ – AAPL), for its part, gets to have exposure in a small but growing market as iPhone sales have likely matured in its existing markets, to a degree.

LEAP, which generates over $3 billion in annual revenue and a mountain of losses, is frequently cited as a takeover target.  On the surface, LEAP is very cheap, as its market cap is roughly the same as Clearwire (NASDAQ – CLWR) despite the fact that LEAP has 3x as many subscribers and generates 3x as much revenue per year.

The Apple deal is a credibility enhancer for LEAP and with the low valuation, as well as the boost in business and status, it may well be viewed as a turning point in the stock and even as an M&A target.  A 20-25% rise over the summer is not out of the question.

Yes, this stock is up 600%.

The market is terrible today but a NASDAQ stock that we covered on a sponsored basis 2 years ago is the biggest winner of the day and is up over 600% since our initiation.

Not only are decliners leading advancers by a 5:1 margin but we are getting dangerously close to having more stocks below their 200-day moving average than above them.  Not good.  Oil is below the $88 mark for the first time in over seven months.  It doesn’t appear as if it has a floor, but I suspect it will not fall below the $84-85 level.

If you do anything today, check out Neonode (NASDAQ – NEON - $6.27).  On a split-adjusted basis, it is up over 600% from our initiation 2 years ago.  The Company has the leading touch-screen technology on the market today and it used in cell phone, ereaders, etc.  There is speculation that Apple (NASDAQ-AAPL) may be infringing on a patent for one of the touch screen motions/functions which could be huge for NEON in terms of royalties or perhaps a buyout altogether.  We did not put a lot of stock in it at the time, but now that the Company has had success, and IP ownership and litigation seem to be on the rise, it could prove to be the cherry on top of the sundae.

We do not have an investment opinion on the stock or price target on NEON but it is one to at least put on the radar.

Disclaimer:

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 and mid 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.

Neonode, Inc. paid GSCR $5,000 for research coverage in 2010.

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 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 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 the FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS 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