HERE IS THE BREAKDOWN ON WHY I PURCHASED SHARES OF SYNC TODAY
Took profits SYNC position on July 10th in the mid-14 range for a 100% plus profit.
Bought shares of SYNC today in the low-7 range. A small starter position to begin. I will increase as the performance warrants.
I mentioned SYNC briefly last week. I wouldn't call it an investment, as it doesn't possess the value/restructuring angle that I look for when I profile companies in "The Gun". I wouldn't call it a trade either, as I am willing to hold it for longer than a few weeks. I guess you can call it an "investitrade". It's a mix between an investment in a concept company that has some real potential and a trade in a company that is exhibiting a good deal of technical strength.
Insiders were very active in buying the company after it IPO'd at the low end of its expected range recently. They were snapping up shares all the way up to $6 per share. They have been consistently growing revenues while achieving profitability in 2011. Their major source of revenue comes from advertising as a result of a partnership with Google and shared with the companies they count as their clientele. Major customers include Verizon, Toshiba and Charter.
Given the fact that they are in the high profile and increasingly popular world of facilitating online video content they do make for an acquisition target for a company looking to expand their reach in this field over the coming years. Acquisition will come with growing their customer list, adding more sources of value for those customers and becoming an indispensable part of those companies online presence. As those initiatives take off, which I believe they will, so should the stock price.
This comes from the S-1 filing for SYNC:
Well-positioned in large and growing market . The market for Internet-delivered content has grown rapidly over the past several years. We have been delivering online solutions to customers since 2000 and, as of September 30, 2011, had over 45 customers, including some of the nation’s major high speed Internet service providers and one major consumer electronics manufacturer. We continue to make ongoing investments in our platform to expand its functionality. We believe we are one of the only companies that has a platform solution with the scale and functionality to allow the largest high-speed Internet service providers and consumer electronics manufacturers to develop or expand their online video or other online and content offerings. As a result, we believe that we are well-positioned to gain share as the market for these services continues to grow.
Established customer base with predictable search and display advertising revenue . We have long-term relationships with many of our customers which, together with what we believe is a high cost of switching (from our platform to another solution), have resulted in very low levels of customer turnover over time. The majority of our revenue attributable to these customers is generated through search and display advertising. Given the relatively predictable consumer search and page view behavior patterns on our platform, we have experienced historically predictable search and display advertising revenue.
SYNC reported Q4 results earlier this month. They were impressive to say the least. Here are some highlights:
Total Revenue: For fiscal 2011, total revenue was $91.1 million, a 37% increase compared to $66.2 million in 2010. Search and display advertising revenue was $72.1 million, a 57% increase compared to $45.9 million in 2010. The increase was a result of increased search queries and advertising impressions. Subscription-based revenue was $19.0 million, a 7% decrease compared to $20.4 million in 2010. ------> This make it obvious that the company is moving away from a subscription based model into an advertising based model. A long-term plus given the metrics.
Cash: Synacor ended 2011 with $10.9 million in cash and cash equivalents, compared to $5.4 million at the end of 2010. The company generated approximately $8.7 million in cash from operating activities, compared to negative cash flows from operating activities of $1.3 million in 2010.
2012 Guidance:Revenue for the full year of 2012 is projected to be in the range of $121.0 million to $124.0 million. For the full year of 2012, the company expects to report adjusted EBITDA of $12.0 million to $13.0 million.
SYNC is selling at 1.5 times revenues and 15 times projected 2012 earnings. If the projections are correct SYNC should be selling at a minimum of double the current market cap based on the the premium that should be assigned to a growth company in a hot sector that has created a niche for itself that is difficult to replicate. If the guidance is conservative, then the stock should be in the mid-20s by the end of the year.
Either way you slice it, the company is currently undervalued and yes, overlooked, as a majority of Wall Street is so enamored with large cap tech that they aren't bothering to look around to see the up and comers.
It seems that at least some have taken notice as the company has experienced some very positive momentum and increased volume since reporting earnings a couple weeks back. I'm looking for that to continue in the weeks and months ahead.
