Jive IPOs, Broadvision Triples: Who's Next?

by: Mark Gomes

It took nearly two years, but shares of Broadvision (NASDAQ:BVSN) finally took flight. On Monday, it closed at 32.86. This represents a return of 300% in just six weeks!

The move appears to have been sparked by the recent IPO of Jive Software (NASDAQ:JIVE), which also sells social business software. JIVE's billion-dollar valuation clearly got investors interested in BVSN's offerings.

In my initial write up, I highlighted BVSN's R&D efforts in this regard. I also focused on its strong balance sheet (it was trading for less than cash).

At the time, its risk/reward was extremely favorable. However, after this big move, Broadvision is now trading for nearly 3x cash and 7x sales. That bakes in a lot of success while leaving lots of room for losses. Despite the surface comparisons to JIVE, BVSN has not been executing nearly as well. JIVE has grown its revenue by over 50% for several years. Considering its business model and leadership position, Jive's valuation can be defended.

Meanwhile, BVSN's revenues have actually been on the decline in recent years. When it was trading for less than cash, this was acceptable -- the cash provided the luxury of time for BVSN to launch its social business platform. However, JIVE has clearly beaten BVSN to the punch. With BVSN's earning due out on Thursday, enthusiasm in the shares will likely dissipate if it announces another quarter of losses and year-over-year revenue declines.

As such, prudent risk/reward investing suggests that investors should consider moving on to the next company that appears poised to triple. Scanning my coverage universe, Majesco Entertainment (NASDAQ:COOL) now offers the most attractive risk/reward. In stark contrast to BVSN, its shares have recently pulled back, though its business prospects have never looked brighter.

COOL is set to launch a major relationship with Microsoft (NASDAQ:MSFT) next month, which promises to cast its Zumba video game franchise into the limelight. In addition, COOL management has set a low bar with its 2012 guidance. This sent the shares falling, resetting the table for new investors. This is a repeat of last year's conservative guidance, which also sent the shares falling. Three months later, the stock was up 300%.

The company went on to beat its annual guidance by over 35%.

The company seems set to follow its 2011 script. With BVSN hovering 100% above its previous 3-year peak and COOL sitting 50% below its 52-week high, selling the former and buying the latter offers investors the possibility of tripling their money twice in a very short span.

You can find my complete analyses regarding COOL's prospects at SeekingAlpha.com.

Disclosure: I am long COOL.