Seeking Alpha

Mark Gomes'  Instablog

Mark Gomes
Send Message
Disclaimer: This biography is required reading for anyone considering an investment in any of Mark Gomes' selections. It contains critical information about his research and trading methodologies. Mr. Gomes is currently the CEO of Pipeline Data, LLC and a contributing analyst to PTT Research.... More
My company:
PTT Research & Pipeline Data, LLC
My blog:
Poised To Triple
My book:
Faster Than Forty
View Mark Gomes' Instablogs on:
  • 2015 Performance Update... And A New Pick?

    Hi,

    Here's a quick update on our performance to date. There's some subscriber-only information that we're not supplying here (like updated position-sizing and our latest picks), but the bottom line performance number is 100% accurate. It was a rough July, but we're still having a GREAT year (see below).

    Also, we're introducing our latest Pick To Triple to the public, here on Seeking Alpha, this weekend!! To get the pick early, just sign up for our free Newsletter at PoisedToTriple.com. Cheers!

    Tags: QADA, GLUU, JAKK, MATR, AERO, DORM, POST
    Aug 14 12:08 PM | Link | 3 Comments
  • My 2014 & 2015 Performance Metrics

    As many of you know, the final four months of 2014 were tough (for reasons discussed in my prior articles), but four months is a blip in the long-term scheme of things. For the full year, my selections still produced market-beating gains.

    In fact, my official portfolio finished 2014 with a 12% profit versus a 4% gain for the Russell 2000 (which is the closest comp, due to my focus on small-cap stocks).

    2015 is off to a similar start. The portfolio is up 5% (versus 0% or the Russell). This has been driven by 20%+ gains for GLUU and AERO, both of which have had great news to start the year. In fact, all of my picks have been enjoying positive news flow, but their stocks have yet to reflect that. With GLUU and AERO getting off the mat, we'll see if my other picks follow suit.

    As always, I'm confident that they will in due time.

    As always, patience pays…

    (click to enlarge)

    Tags: GLUU, AERO, MATR, JAKK, QADA, DORM, DLIAQ
    Feb 06 3:12 PM | Link | 7 Comments
  • Glu Mobile And Aerogrow Jumped 20%+ On Wednesday… What's Next?

    In recent months, shares of Glu Mobile (NASDAQ:GLUU) and AeroGrow (OTCQB:AERO) have sold off aggressively, despite delivering consistently strong progress in their businesses. In my latest Instablog article, I explained one of the key reasons for the sell-offs, which has also impacted shares of QAD (NASDAQ:QADA), JAKKS Pacific (NASDAQ:JAKK), and Mattersight (NASDAQ:MATR).

    Those who took advantage of the dislocation in price versus business-performance were greatly rewarded on Feb 4 and 5 when both GLUU and AERO rose more than 20% on positive news releases.

    Glu Mobile

    Glu Mobile jumped more than 20% today after reporting another great quarter. More important than the small jump in share price is the qualitative strengthening of the company's story. Management is unlocking value in ways we have for many months predicted it would.

    We expect Glu's share price to perform well in 2015. The company grew at an astounding rate in 2014 - over 100% YoY. The second half of the year should be especially good to shareholders, since this is when Glu will release the vast majority of its titles. Evidently alert to the needs of shareholders, the company has said it will announce more celebrity games in the first half.

    Q4 revenue of $76.2 million outperformed the midpoint of guidance by 22% and outpaced Q4 2013 by 78% (36% organic). EBITDA of $14.1 million beat guidance by 214%. The company earned $12.2 million, or $0.11 per diluted share vs. guidance of $0.01-0.03.

    With such an explosive Q4, Glu outperformed full year expectations too. Revenue grew 113% YoY to $242 million, bringing four-year CAGR to 37.9%. Full-year EBITDA was $35 million, at the upper end of guidance.

    Management raised 2015 full year guidance from $220-260 million to $245-275 million. This assumes outsized hits, in accordance with Glu's habitual conservatism.

    In our article on October 30th, 2014, we noted how the huge Kim Kardashian: Hollywood app isn't the traditional mobile game: "It's more like an interactive magazine or mini TV station that allows Kim's fans to stay abreast of what's going on in her life. It's media property."

    We predicted Glu would duplicate this model with other celebrities. Kim Kardashian was pulling down tens of millions of dollars. Others would want a piece of the action as well.

    Glu more than satisfied our expectations yesterday by announcing a 5-year exclusive mobile gaming partnership with Katy Perry.

    Its potential is enormous. Katy Perry is even more prevalent in pop culture than Kim. She just starred in the most-watched halftime show in Super Bowl history. She is one of the most popular American singers alive. She boasts more than 170 million total social media followers. By comparison, Kim Kardashian claims only 76 million.

    Were Glu to monetize Katy Perry's fans as successfully as it did Kim Kardashian's, the company could see $100 million in revenue during the game's first full quarter, even assuming no improvements to the monetization platform.

    Katy Perry almost certainly won't be the last celebrity to sign with Glu. CEO Niccolo de Masi said several other potential entertainment partnerships are in late-stage discussions. These will provide the backbone of his prediction that "Glu titles will have the support of over 400 million social channel followers by the end of 2016."

    Consider the significance of this statement in light of de Masi's tendency to promise less than he can deliver. Glu Mobile monetized Kim Kardashian's 76 million social media followers to the tune of $75 million... in only two quarters. What could they do with 400 million... or 500 million?

    Racing Rivals also had a strong quarter, reporting daily revenue records despite being live for more than 15 months (it became a Glu property only in the fall). Even sixth quarters after its initial release, Deer Hunter 2014 pulled in more than $10 million.

    Glu has repeatedly proven it can maximize app monetization, keeping customers engaged for a many months by releasing staggered content updates.

    "Having now reached scale" (de Masi's words) and sustainable annual profitability, Glu will deemphasize growth by acquisition, focusing instead on organic growth to capitalize on its leadership in the celebrity, shooter, racing, and sports genres.

    Glu will add six new teams this year to build on its success in these genres. Three will focus on the celebrity genre. Niccolo de Masi said it is his eventual goal for each team to work on only one game. This gives us at least a hint of the minimum number of celebrity games he expects to launch.

    In both his opening and closing statements, de Masi said, "Full year guidance for 2015 does not assume any Kardashian-size hits. As such, there remains significant opportunity for upside in all financial metrics."

    Glu plans to launch only one title during Q1 2015, during which it expects revenue of $50-52 million-only 6% more than 2014. Three titles will launch in Q2, and ten titles in 2H, with Katy Perry's title launching in Q4. 2H will be strong indeed.

    AeroGrow

    AeroGrow doesn't report quarterly results until February 17th. Yesterday (Wednesday, February 4th), however, it jumped more than 23%. To understand why, we must dive into its key partnership with Scotts Miracle-Gro, the world's leading marketer of branded consumer lawn and garden products.

    In October 2014, Scotts Miracle-Gro announced the formation of the Hawthorne Gardening Company, a wholly-owned subsidiary "focused primarily on the emerging areas of indoor and urban gardening products."

    One of Hawthorne's main products is AeroGarden, provided by AeroGrow International.

    In its earnings call on Wednesday, Scotts announced that a $40 million pool would be invested into the business. About half is going to "emerging areas like SLS (Scotts Lawn Services) and the Hawthorne Gardening Company."

    Later in the call, Scotts' CEO discussed potential acquisitions. He stated, "I think you will see some important... acquisitions... for the remainder of the year, less than 1% I think by the time we close. So I don't think it's going to add a huge amount to the year... but... it's an effort that the entire corporation whether it's the sort of corporate side or the operating side of the business are very much aligned on these areas of growth. And just to repeat that urban, indoor, hydroponic, crafty naturals are very much a focus area. And so I wouldn't be surprised to see something happen in that space."

    Quite clearly, he was hinting at the notion of acquiring AeroGrow .

    In addition to that bullish news, AeroGrow announced in mid-December that the all new Miracle-Gro AeroGarden 7 LED sold out as the main Gold Box feature on Amazon.com's Deal of the Day on December 14th. This after being declared an Amazon Holiday Best Seller during the 2013 holiday season.

    AeroGarden's success in 2013 is probably why Amazon promoted it heavily on such a big shopping day this year. AeroGarden took full advantage of the opportunity, but investors seemed to ignore the good news, letting us load up on AERO straight through January.

    The market often acts irrationally. AeroGrow's 25% decline in price between January 12th and February 3rd is a good example of this.

    The positive news from Scotts Miracle-Gro today apparently acted as a wakeup call for some investors, who bought in volume and drove the price up. Even after the big 23% day, AERO is still priced as it was from early December through mid-January.

    With a company as small unfollowed as AERO, inexperienced investors can easily get worried when the stock price plummets. This is often a function of volume, and a gap between supply and demand, rather than fundamentals.

    So stick to your guns, and let's see what AERO announces on February 17th. From our research thus far, we believe it will report favorable results.

    Before we close, let us make a final distinction... one we have made many times. The last few months, our stocks have given us a rocky ride. Our companies, however, have excelled by most any measure we could hope for, including QAD , JAKKS Pacific , and Mattersight .

    When a company is executing well, but its stock is diving, it's usually an opportunity to take advantage of the price dislocation. I make this distinction often, and I hope you made it yourself before GLUU and AERO lifted off yesterday. These are excellent companies, and we have every reason to be confident in their futures and our prospects of being rewarded for buying them before the market figured out just how excellent they are.

    Tags: AERO, GLUU, long-ideas
    Feb 05 5:28 PM | Link | 13 Comments
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.