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Synacor Inc: A Stock With Serious Growth Potential

|About: Synacor (SYNC)

"Synacor Incorporated (NASDAQ:SYNC) provides startpages, TV Everywhere solutions, Identity Management services, and various cloud-based services for cable, satellite, telecom, and consumer electronics companies in the United States, the United Kingdom, and the Netherlands. The company also offers authentication and aggregation solutions for the delivery of online content. Its technology facilitates customers to package online content and services with their high-speed Internet, communications, television, and other offerings. The company was formerly known as CKMP, Inc. and changed its name to Synacor, Inc. in July 2001. Synacor, Inc. was founded in 1998 and is headquartered in Buffalo, New York."

To get started, it is important to first know how the stock has performed thus far. The company had its initial public offering in February 2012 at $5.00 per share. Shortly after the IPO was released it was pumped aggressively by the National Inflation Association (NIA) newsletter. You can learn more about the pump by reading a blog post written by StockBaller by clicking here. The pump pushed the stock price all the way up to around $18 per share which is a return of 260% from the stocks IPO price. The companies numbers did not support such a huge appreciation in stock price. Since its high, it has fallen all the way to as low as $2.58 (52-Week Low) because the hype around the stock had died and people realized it was overvalued.

I am constantly searching for undervalued companies that have lots of growth potential. I believe SYNC is the next stock we could see more than double. I believe people have neglected the stock and shown it no, to little interest because it was a stock that was so strongly pumped.

SYNC has seen its stock prices start to rise again lately and no, it is not from a pump-and-dump scheme, but by the following positive news.

  1. SYNC struck a deal with Verizon Communications Inc. (NYSE:VZ). The deal is said it will expand access to television shows and movies available online to Verizon's 5 million FiOS television subscribers. The financial details were not disclosed but this is a big deal for SYNC in my opinion and should bring in nice revenues.
  2. The company reported solid first quarter results which did not included the deal with VZ.
  3. SYNC was asked by Google Inc. (NASDAQ:GOOG) to showcase their Cloud ID Social Login with Google+ Sign-In for TV Everywhere Sites and Apps, Google I/O, May 15-17, at the Moscone West Convention Center in San Francisco, California.
  4. Ron Frankel, President and Chief Executive Officer, will present at Needham's 8th Annual Internet & Digital Media Conference, to be held at the Westin Grand Central Hotel in New York, New York on Tuesday, June 4, 2013 at 3:00 PM ET.
  5. On May 30th they announced, as a complement to its Buffalo, NY headquarters, that it has opened a specialized engineering hub in the Boston area with numerous new positions.

10-Q - Revenue Breakdown

In its most recent SEC filling, form 10-Q, you can see that the percentage of revenue for 2012 & 2013 for subscriber-based services was 16% and 17% respectively. It is in my opinion that with the new VZ deal that the subscriber-based services have to at least double. How you may ask? If you take the 5 million subscribers Verizon currently has and credit SYNC with a conservative $1.00 per subscriber, the company would add 5 million dollars to subscriber-based revenues. If you keep search and display advertising revenues constant at around 25 million, it would increase total revenues by about 16.6%.

It is in my opinion that SYNC is becoming a healthy, profitable, and up and coming company. I believe why the stock price is currently down below its IPO price is simply because of:

  1. The lack of volume and
  2. The 12.32% of float that is short

I strongly believe SYNC should be no less than its $5.00 IPO price. I believe this company will continue to strike new deals because of its continuing success at gaining exposure at events similar to the GOOG and Needham events. These new contracts will continue increasing revenues, mainly the weaker revenues, which again is the subscriber-based revenue.

Conclusion

It is in my opinion that the EPS will be highly favorable and outperform any expectations that are currently set for the company. I have not seen any analyst that are currently covering SYNC and to me that makes this a great undiscovered stock pick for the rest of 2013. The stock price is simply oversold and overlooked by many investors. Soon as volume picks up, the stock price will again revisit its $5.00 IPO price. Than I believe if you start factoring in my above estimate/projection, the new office in Boston, and the forcing of the 12.32% of the float that are short to cover, we could see the stock go up 50% from $5.00 per share. That is why I strongly believe a stock price target of $7.50 is reasonable.

Disclosure: I am long SYNC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.