Seeking Alpha
Profile| Send Message|
( followers)  

What’s in a name? Well, in the case of Majesco Entertainment, whose ticker is COOL, it's hands-down the hippest symbol in the stock market -- and not just because of the name. COOL has been on an extreme money run over the past few weeks, blasting to new 52-week-highs despite the markets’ many ups, downs and in-betweens.

It wasn’t long ago that my 18-year-old son sold his X-Box at a garage sale for beer-pong money, and I can’t say I’ve really witnessed any console game that I’ve totally loved. I’d even go so far as to say I wouldn’t mind minor brain surgery to remove the gothic start-up music from Halo that imprinted itself in my memory banks during the kid’s brief obsession with that title. But the truth is, the market for these games is bigger, better and more profitable than ever before.

In fact, up until this year, Majesco Entertainment was simply a low-end trading vehicle which would occasionally attract the attention of market participants who would scalp some small profits off of COOL price pops and be done with it. Inevitably, COOL’s share price would decline almost as quickly as it rose, with COOL shares returning to the obscurity that they and Majesco seemed to deserve.

Toward the end of last year, however, things started to pick up for COOL shares, leading to the recent dramatic price rally. Now it’s hard to imagine too many investors holding on during COOL’s five-year basing period, but technically speaking, that characterizes the shares’ price movement since about 2006. With the exception of a brief lift last year, the shares have basically been trading in a $0.50 to $1.00 channel during that time frame, with $0.75 serving as a recent consolidational base.

At the beginning of this year, sellers simply lost their COOL. Buyers stepped in at the $0.75 level, and the share price of COOL stock hasn’t looked back — touching a new 52-week high recently of $3.84 before closing slightly lower. What’s behind the super-COOL bullishness? Majesco’s sales numbers, for starters. In the company’s most recent annual report, it showed a quarter-over-quarter sales gain of $49 million vs. $28 million, with massive increases coming from Nintendo Wii and X-Box games.

Other companies in the space, most notably the long-suffering laggard Mad Catz Entertainment (MCZ), have been racking up impressive sales numbers as well. And companies in this space that gain sales traction become very attractive, because margins improve dramatically with increases in game sales numbers. In fact, their rise is often meteoric, which can also result in gravity-defying price plunges if sales aren’t up to snuff. Very unCOOL.

With COOL’s share price up about 500% over the past six months, some price consolidation is inevitable, and my bias would be to monitor the ongoing feeding frenzy for a good short sale. Right now, however, momentum buying and perhaps some short-chasing are serving to drive the stock price up, and may continue to do so over the short term. So if you’re courageous enough to buy high at these levels and turn a profit, well, that would be totally COOL.

Additional info here, here and here.

Source: Majesco Entertainment: What's in a Name?