First trading update from Blinkx where EBITDA expectations are being revised lower than analyst forecasts – by about 20%.
This alone would have accounted for a 10-20% drop in the price, but the statement from Blinkx talked about ‘Industry-wide issues of efficiency and effectiveness’ – not sure what this means, but the statement seems to cast uncertainty on Blinkx’s business model, and investors hate uncertainty and vague statements like this…
Cut trading positions and trim core positions in Blinkx, until things become more clear and analysts revise the EPS Forecasts and an updated FV can be calculated…
Stock down 8% on no news!.Still in the spread bet trade at 80 with a stop of 60 – but as mentioned the last tweet, the stock could get carried down with the crushing of growth stocks in the US.
But this is not a high growth stock any more.
Looking at the fundmentals it is cheap:
Blinkx has 120mm in cash, made 7.05 cents per share to Mar 2014 ($25mm),
Based on current future EPS predictions – which are not overly aggressive, your pay back excluding the Cash, is 4 years!.
At 66.25 Blinx is on a 5Y implied growth of 6%.
But how do you invest in this name when it is so volatile?
If it drops below 30p, then there is something fundamentally wrong with the business we are missing. Exit.
Buy a 1/2 of your position here at 66, and another 1/2 if it goes up 10% or down 25% at around 45p. Take profit at 95-110 area, cut at 30p for around 2:1 risk reward.
Health Warning: this is volatile name – don’t take the risk on this if you cannot stomach the loss…There are several other more safer opportunities in well established companies like General Motors with similar risk rewards.
First $BLNX then $QPP!
Is the London AIM Market full of companies who are basically defrauding investors by lying about how much money they are actually making?
Can auditors and stock analysts be fooled so easily and then be found out by smart professors or research boutiques?
This kind of thing destroys public confidence in investing in promising growth companies and has to be stopped by the regulators.
2CentView has always been keep positions small and take profits in these kinds of investments – which are both zero or very low cost core positions.
$BLNX at 80p now trades on 10% 5Y implied growth – cheap for a growing tech stock – but the short sellers continue to loom over the stock.
Short interest has come down from peak, but you feel those who covered may look to short again!.
If you want to get involved, apply the following strategy:
Buy here at around 80, take profit at 120, CUT at 60p for 2:1 risk reward.
This is high risk, so keep positions relatively small and be prepared to take a 25% loss.
The market is very volatile and high growth stocks – which Blinkx is no longer!- are getting crushed – and may take Blinx with it…
Average daily volume on $BLNX is around 6million shares – and big hedge funds will probably short 2-3mm shares at least – easily moving the market.
With the uncertainty around the business model, there is no-one to take the other side and support the stock …so the stock caves in – it does look however that the 95 area is a support.
There is a similar situation with $HLF – HerbaLife (FV=65), which Bill Ackmann is short 800mm based on his view (and detailed analysis) that the business is an illegal pyramid scheme. $HLF, however has the almighty Carl Icahn on the other side of the trade supporting the stock and even adding 3 of his staff on the HerbaLife board.
Without an ICAHN for $BLNX we are at the mercy of the short sellers,,,, – the response to the Blog the company put out seems convincing… Citi have stuck to their price targets and commented positively on the seriousness they have put into the allegations and the independent reviews they have done….however … only time will tell whether the Blinx business model is sound.
Just hope the stock doesnt trade below 80p when stops may be triggered!
2CentView has a zero cost core position in $BLNX
Blinkx pre-announced revenues and earnings today – in line with market expectations.
It also put a statement on it’s website re the allegations from the prof.
Short interest has halved from it’s peak and following this news expect it fall further – the smart money shorts have covered their shorts around 100.
FV=150 – expect the stock trade up to there at least if the capital markets day in London is received well by investors.
5Y implied growth = 18% vs 118.
Short interest still high on Blinkx so it is now a Battle – like the Ackerman vs. ICahn/Loeb battle on HerbaLife … normally best to stay away when large Hedge Funds do battle – it could get Bloody!
if you decide to stay involved it might be bumpy
2CentView has a core position in $BLNX which does not plan to sell here!
CEO Mukerjee is at the GS tech conference in San Fran and expected to speak – hopefully will say something to calm investors on the allegations from the Prof…
Companies in their search …guess who was in he profs books at the time …Microsoft!
Harvard have to do something about this – paying a prof to denigrate the competition!
There is still a lot of short interest in $BLNX – if they all decide to cover the stock could surge…but they could also stay short…
CEO presenting Feb 12 – he will surely make specific comments about the article
Muddy waters is a investment firm which researches companies who may be involved in business, accounting fraud or has fundamental problems (ie the enrons of the world). Carson Black’s spoke briefly about Blinkx it seemed he just started his research and simply shorted the stock on the back of the harvard prof blog rather than his own.
see interview below
2Centview is that the risk/reward looking favourable at 110 area with upside of 65p
trade: Buy here at 110, stop 80, take profit 175 keep a core if you do not own$BLNX
Blinkx down over 30% following comments in the blog below from a Harvard Prof
Investors clearly have taken the comments seriously – after all it is a professor from harvard.The company came out with a statement refuting the claims, but the stock has not fully recovered.
It is mentioned the report was produced on behalf of an un-named client – this could possibly be one of the recently parted Executives (but surely not the CEO who left a week ago), who felt obliged to make public impropriety at the company. So we have to take it seriously!
FV for $BLNX is 175. If the allegations are true, and it is not clear what impact the allegations will have on their share price – and Citi who recently upgraded the stock to 245 should come out with some paper assessing the impact. Some analysts are sticking to their targets but do not comment on the allegations. The company should refute the specific allegations. CEO mukerjee is presenting at a conference on feb 12.
Avoid buying Blinkx until the muddied water is made clear, as the 2Centview is that the risk is currently evenly balanced between going back to 175 or down to 75p!
2CentView has a (zero cost) core position in Blinkx.