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Online retailer RedEnvelope (NASD:REDE) had a hard day at the office recently. Make that a hard month. The company lost its CEO. JPM securities downgraded the stock when it missed its fiscal Q3 numbers (ending January 1, 2006) and issued disappointing guidance.

But, not all the news was bad. The company added 586,000 customers over the year with that number now totaling 2.8 million. The company ended the quarter with about $29 million in cash and no debt. Revenue is expected to grow 7% to 10% next year (hardly burning down the barn but better than shrinking), and the company has a new CEO, COO, and head of marketing, all of whom seem to have good backgrounds. The incentives given to the CEO and COO seem to be ones that should keep them motivated to beat the guidance given by previous management.

RedEnvelope's business of online gift giving should be one that continues to grow as more people shop on the internet. The brand is well-known and seems to be respected. At least the customer growth would indicate satisfaction with the service.

The company trades at just under $10 about midway between its 52 week high/low of $7.06 and $13.25. RedEnvelope has a market cap of $90 million. Back out the cash, and the company trades at about 60% of annual sales.

If one or two things go right at RedEnvelope, the gift could be a pleasant surprise.


REDE 1-yr Chart


Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was president of Switchboard.com when it was the 10th most visited site on the web, according to MediaMetrix. He as been on the board of TheStreet.com and Edgar Online. He does no own securities in companies he writes about.

Source: Does A Pleasant Gift Await At RedEnvelope? (REDE)