Archive for March, 2015
Remark Media – Update – The short interest reported after yesterday’s close for Remark Media is now at the highest point since there has been a company called Remark Media with 225,000+ shares sold short. Given Remark’s tiny float and very smallish daily trading volume of 10-15,000 shares per day, this is actually a very significant short position and a situation that bears watching for several reasons –
1) Rumors abound that Sharecare may be about to file for an IPO. Some have them announcing as early as the conference where they are presenting today –
While we have seen nothing to substantiate the rumors of such an announcement, we are confident that Remark’s ownership stake in Sharecare will prove to be worth significantly more than Remark’s entire current market cap when an IPO does occur.
2) The launch of KanKan is imminent and the product’s consumer/social media focus has the potential to put Remark Media on many new investor radar screens – as a player in the social media space and potentially a play on the growth of that market in China.
We believe that Remark Media is significantly undervalued on a sum-of-the-parts analysis and that recent developments with roomlia, KanKan and Sharecare offer the potential for major upside as new investors become aware of the Remark story. We note that Remark Media’s shares are mostly owned by its management and a few institutions and that one of the largest holders (Ashford Management) has essentially doubled down on its Remark stake over the last quarter or so and now owns just under 10% of the company. The bottom line is that the float of Remark shares is very small and the thin trading volume allows for the stock price to move significantly higher with just a small uptick in demand and there are several events on the horizon that could cause such an uptick. This is not a stock that you want to be short at current prices and we believe that the speculators behind that relatively large 225,000 share Remark short interest are pretty brazen given the totality of the circumstances.
Inuvo – As we discussed in previous updates, Inuvo shares have moved higher and we expect to see it ultimately settle in a higher trading range following initiation of coverage by Zacks. We are pleased to note that as of this morning Inuvo is now trading at a new 52 week high north of $1.80. Despite this increase in the share price, we continue to believe that the shares are undervalued and that the Zacks coverage represents just the beginning of the Inuvo story finally beginning to gain recognition among investors. Beginning tomorrow, Inuvo will enjoy the benefit of gaining the exposure in the financial media that comes when a company’s stock achieves a new 52 week high and this is significant because we believe Inuvo’s performance over the last 18 – 24 months and valuation relative to its peers is a story that will continue to attract new investors. Inuvo’s stock price is moving higher without any new reported developments simply because the Inuvo story is starting to get discovered. This began with the Zacks coverage and the process will only quicken with the stock getting the exposure of hitting new 52 week highs.
The bottom line is that Inuvo is a great little mobile advertising growth stock that is undervalued relative to its growth potential and we fully expect to see the stock continue to trade higher. Inuvo is cheap below $2 and we do not expect that investors will have much longer to buy shares below that level.
Remark Media – Remark’s roomlia division announced a deal with Siteminder today that should allow the company to expand to most major markets in short order. We believe this is significant as the roomlia business has the potential to eventually be the largest revenue engine among Remark’s operating divisions. While investors will likely be focused on the IRS.com, Taxextension.com and Bikini.com businesses in the first half of this year, we will be surprised if roomlia is not on pace to surpass them both in terms of revenue production by Q2 of this year and deals like the one with Siteminder make this outcome even more likely.
Earlier in the month we mentioned our expectation that Remark would go to market to raise capital and for this reason we were less likely to be in a hurry to buy shares. Since that time, the stock has pulled back 20-25%, trading at times near 52 week lows in the $3.50 range before bouncing back to a trading range just over $4. While some weakness would be expected in the scenario where the company may be about to offer stock to raise capital, we believe that sell off is entirely overdone and we view any price below $4.50 to represent an excellent buying opportunity.
We have recently posted several updates on Remark Media that were very bullish and we maintain that long-term bullishness. However, we do believe that the company’s current financial position will require the company to raise money in the near term and this makes us take pause from a near term urgency to buy the shares. While we are not suggesting that Groove participants should sell shares at these levels (because the stock remains cheap and illiquid)) we will be watching to see if the company does a raise similar to prior placements – where the company took care to limit dilution to the degree possible. We believe that much of how such an offering will be received will (as always) be heavily dependent upon the terms and timing, but note that this opens up the possibility for near term weakness in the shares. Remark remains a great holding for the long-term, but those considering adding to their holdings or establishing a new position might want to wait and see because the stock could trade lower depending on the terms of the financing. If it does, we would view any such weakness as simply an opportunity to add shares or establish a position at a lower price.
1)Inuvo has been picked up by Zacks with an Outperform rating and a $2.30 price target. We believe this could be a big deal because it is the first national firm to pick up coverage of Inuvo in its history (previous analyst coverage has been by smaller, regional firms) and this is the highest price target in years. We have seen an immediate uptick the volume traded since the Zacks report was released and we will be surprised if we do not see the follow through take us to a higher trading range for Inuvo.
2) Rave shares continue to show strength as each selloff related to articles attempting to paint Rave as overvalued are met by heavy buying in the $11 range. With the turnaround at Pizza Inn (6% same store sales growth and what appears to be the continuation of that trend), Pie Five’s extraordinary store level economics (17% same store sales growth) and the openings of a new franchise or company owned store almost weekly, the Pie Five growth story gets better and better. As more investors are exposed to the opportunity in the fast casual pizza space, we believe more will begin to see Pie Five as one of the likely winners in the race to the top of the space and the resulting demand for shares will continue to push RAVE to new 52 week highs.
3) Travelzoo share continue to show strength and seem to have found a new trading range around $10 per share. We are aware of new institutional buyers as well as new attempts by institutional buyers to make contact with Travelzoo management, to no avail. Travelzoo management has not made any kind of public announcement in a very long time now and the silence is deafening.