Buy SYNC @ $2.57
Synacor Inc. (NASDAQ--SYNC)
Valuation-$$6.39Price December 17, 2013-$2.57
We have been following SYNC for
about a year now. While we have traded it a few times over the past year, we
never bothered to recommend it, or hold it very long. But when Mindspeed got
taken over last month for a 66% premium we were angry because we had traded it
also a few times, but were not in it when it got taken over. So despite the
fact they we have been doing way more selling than buying lately due to the
frothy markets, we think this is a good situation. Plus we have been a bit derelict
in not recommending several other stocks we have bought-and sold like GSB, INFU and SLTM
(which got a 40% premium takeover offer on Monday).
Trading at only 43% of our
valuation and with 50% of its market cap in cash ($1.27 a share) we think this
is a BUY.
Their latest quarterly results
weren’t stellar, but not bad either. Sales were $26.6 million down from $28.3
last year. But Q4 sales are expected to be $28 to $29 million. They reported a
loss of $.1 million compared to a loss of $.2 million last year (excluding
stock based compensation) so they are not burning cash.
Two funds own about 22% of SYNC
stock.
There are about 30 million shares
outstanding and it trades about 100,000 shares a day.
About SYNC:
Synacor's white-label platform
enables cable, satellite, telecom and consumer electronics companies to deliver
TV Everywhere, digital entertainment, cloud-based services and apps to their
end-consumers across multiple devices, strengthening those relationships while
monetizing the engagement. Synacor (SYNC),
is headquartered in Buffalo, NYposted by Cheap Stock Investor | 10:32 AM
4 Comments:
Any concerns about their customer concentration, particularly with Google? Especially given that their agreement with Google is set to expire in February 2014? Do you think they will renew?
Yes. Investing in small companies is always risky. I waited on Motricity until they had renewed their big contract, and a few months later the customer canceled anyway. I know I can't be right 100% of the time. Which is why diversification is important.
I understand, I just wanted some information on your thesis for the name. The company seems to have many things working against it, including the shift to mobile and Microsoft's Windows 8 change to the startpages. They're not exactly generating great cash flows either (though they have a nice stockpile going). Your track record speaks for itself, so I'm wondering what I'm missing here.
My methodology is very formula driven. It indicates a value more than double the current trading price. I read all their press releases, financials, but don't really care what they do, other than they are a tech company. As I said, there are many things that can go wrong with small companies, but if 1 good thing happens a 50%+ gain can come pretty quickly. And with the cash cushion, the downside would appear somewhat limited.
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