Friday, September 12, 2008

Edelheit's Updates on PhotoChannel

Again, from the Value Investors Club:

There is absolutely no change to fundamentals. This is simply forced selling by funds blowing up. I`m personally trying to take advantage.

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My estimates are that the company earns $0.25 per share in cash eps (excluding amortization) in 2009. The company is cash flow positive now and is poised to have have revenue of $6 million in revenue in the September quarter and $8 million in the December quarter.

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[...] All of the losses came from getting Costco up and running, building data centers, hiring extra software consultants and from lingering losses from Pixology. That is mostly in the past.

Also note that of their income expenses, that over $1 million are non-cash amortization expense.


Albert said...

How could he possibly know that it's all forced selling by funds blowing up?

He brings up how much cash they have on hand, but doesn't address how the new acquisition may affect that. He's also cut his earnings estimate for 2009 by nearly 50% from $0.45 to $0.25. Nor does he address the fact that, though capex is "really, really low," the company itself said that expenses won't be decreasing, but rather the rate at which expenses are increasing will itself begin to slow (i.e. expenses won't be rising quite as fast as they have been).

I'm not saying PNWIF's not a value, but it would be nice if, once in a while, AE could mention some of the downside risks, which go completely unaddressed in his write up.

Anonymous said...

The stock is pushing near 52-week lows lately making all the optimistic talk suspect.

This is far from a lock on generating substantial EPS.

DaveinHackensack said...

I'm sure he can't know that it's all forced selling by funds blowing up, but that's his theory. He posted a link on his blog to piece arguing this, Puking up Stocks.

Regarding his estimates, he hasn't been consistent with his terms with PhotoChannel. His idea predicted 45 cents in cash flow in '09; now he predicts 25 cents in "cash EPS" (i.e., earnings-amortization) for '09.

Good point about the possible effect of the acquisition on cost. My sense is that PhotoChannel is going more for expansion and market share now than it is trying to maximize earnings in the near term, so this could be another case of AE underestimating how long it takes for his thesis to play out. We'll see.