Vringo: Parabolic Rise Imminent?

| About: XpresSpa Group (XSPA)
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When examining Vringo's (VRNG) technicals, it looks to be in a bullish state, as can be seen here. Technical analysis aside, the PPS (price per share) of Vringo will be greatly influenced next week by the outcome of its lawsuit against Google (NASDAQ:GOOG), IAC Search & Media (IACI), Gannett Company (NYSE:GCI), Target Corporation (NYSE:TGT) and AOL (NYSE:AOL). Developments coming out of court so far suggest Vringo has done an excellent job presenting its case to the court. It seems that Google's lawyers underestimated the risk of going to court and are overpowered by their Vringo counterparts. Dave Manuel defines a parabolic move as, "When a stock starts going up, the buying interest increases dramatically, sending the stock into orbit." Basically, the interest in the stock keeps compounding and growing, triggering a chain reaction. Are we about to witness parabolic movement with the Vringo stock next week?

To summarize the case for people just joining, it is a classic story of David and Goliath, played with Vringo portraying the role of David and seeing Google as infringing on its patents (which are used by Google in adwords to do content filtering). Why is this important? Well, adwords derive most of the revenue at Google and based on this revenue they are able to provide their other services like Gmail, Google Plus, Android and many others. Vringo, for some reason, appears to have targeted only adwords on the search engine and left out Gmail, which also displays ads based on content filtering based on Vringo's patent. Revenue estimates derived from Gmail can be seen here, though they are small compared to adwords. Why is this important? With a win against Google, there is chatter among traders in the market that Vringo might target Microsoft (NASDAQ:MSFT) and Yahoo (YHOO) next, which also allegedly utilize content filtering. It must be noted before Google supposedly utilized Vringo's IP to do content filtering (the "Smartad system"), they had a system named internally as the "Dumbad system." Previous dumb systems infringed on Overture's patent and Google settled by paying $226 million in shares to Yahoo. Upon cross examination of Dr. Becker during the trial, this was revealed to the jury. By switching to the smartad system based on Vringo's patent, Google's revenue went up by 20%, which suggests that the damages Vringo is seeking are very reasonable.

Outside of the Google Case

The Google lawsuit isn't the only opportunity for Vringo to capitalize on their patent portfolio. Vringo purchased mobile patents from Nokia (NYSE:NOK) with the agreement that when revenues go over a certain number, they will be sharing them with Nokia. With these new patents acquired, Vringo has filed a lawsuit in the UK against ZTE. This case starts in February 2013. On Oct 23rd, Vringo's patent for "contact matching of changing content across platforms" was approved by the USPTO. With this patent in Vringo's arsenal, traders have speculated it is possible that the likes of Facebook (NASDAQ:FB) and others will be targeted. It remains to be seen what strategy will be employed by Vringo with this patent and its massive potential.

Bottom Line

If there is a favorable verdict next week for Vringo, we might see a rapid rise in the PPS of Vringo. With the ZTE case coming up and the highly beneficial potential to sue other large corporations, and based on their impressive and lucrative patent portfolio, it will be good to keep Vringo in your watch list.

Disclosure: I am long VRNG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.