Saturday, December 02, 2006
GOAM Price Target Table
In my previous analysis, I have an extremely bullish target of $130. To moderate that target. I have cut down the growth rate and come up with conservative PPS estimates for next 5 quarters. According to my estimation, the PPS should be about $60 by this time of next year. The numbers are in thousands except EPS and PPS. 2006 Q2 and Q3 numbers are actual numbers. Rest of the numbers are projections.
Please do your DD and trade accordingly.
Please also check out these links for more facts. For IP and VRS growth rate see Feb 27 2006 8K. This filing is for HandsOn merger. The meger was later terminated by HandsOn. The reason of termination is unkown to the public. My guess is the huge VRS growth this year caused HandsOn to feel short changed in the merger. For Q2 and Q3 IP Relay revenue. see 2006 Q2 10Q and 2006 Q3 10Q For the competition and HandsOn merger termination, see the "competition" section and the section above in this 10K 2005 10K For their latest VRS beta, see i711 VRS. For FCC comments about VRS, see FCC Commissioners' comments
Like any stock speculation, there are risks involved. The biggest risk I can see is FCC changing the rate too often and adjust it too low. While I don't think it is a threat, but use your own judgement. Read this link for more details FCC Document
Note:
1) PPS is calculated using a PE of 20 on the extrapolated annual EPS from quarterly EPS. For instance, Q4 of 2006 has a quarterly EPS of 0.13. 0.13 x 4 x 20 = 10.15.
2) IP Relay, VRS and other revenues are net revenues after substracting the cost of these revenues.
3) The IP Relay Net Growth Rate is cut by 20% for 2006 Q4, then 10% and 5% in following quarters until it is 5%.
4) VRS initial net revenue is based on the quarterly IP Relay revenue after the initial IP Relay launch. Since the dollar ammount of VRS is 3+ times bigger than IP Relay. They should make $936k (312k x 3) in 2007 Q1 if they can match the performance of their IP Relay launch. To be conservative, I cut it by half -- 468k. The VRS growth rate is also cut to 15% -- In the first few quarters of IP Relay launch, they grew by 25% average per quarter.
5) Other Revenue should grow at least by 100k in Q4 and Q1 of 2007. These two quarters are best quarters for commision revenue. They had 200k more last time. After 2007 Q1, I change it back down. The company has guided in their 10Q that this revenue will grow. So my estimate is conservative.
6) Sales & Marketing cost changes quarter by quarter. Sometimes it drops. 2006 Q3 has a 40% increase than Q2. It is an anormaly because they started doing VRS marketing without any revenue to offset it. Down the road, I assume they will grow that cost by 100% a year, which is their growth rate of this past year. This translates to a %15 growth quarter over quarter. The growth rate should go down as IP Net growth rate goes down and VRS growth rate stays at 15%.
7) G&A, R&D costs stays the same. The company has guided in their 10Q that these costs will go down as they continue to cut cost, bring R&D work in house.
8) Depreciation. I used the same number as in Q3. This can either go up and down.
9) Other Income. 2006 Q3 is 46k. Q2 is 30K. I just gave a 35k. This can either go up and down .
This column is for information and educational purpose only. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. ¶ 10:52 AM
Please do your DD and trade accordingly.
| 2006 Q2 | 2006 Q3 | 2006 Q4 | 2007 Q1 | 2007 Q2 | 2007 Q3 | 2007 Q4 | |
| IP Relay Net | 714 | 1155 | 1617 | 2102 | 2523 | 2775 | 2914 |
| IPRS Net Growth % | 69% | 62% | 40% | 30% | 20% | 10% | 5% |
| VRS Net Rev | NA | NA | NA | 468 | 538 | 619 | 712 |
| VRS Net Rev Growth% | NA | NA | NA | NA | 15% | 15% | 15% |
| Other Rev | 703 | 584 | 684 | 684 | 584 | 584 | 584 |
| Marketing Cost | 479 | 689 | 792 | 911 | 1047 | 1152 | 1210 |
| Marketing Cost Growth % | -12% | 44% | 15% | 15% | 15% | 10% | 5% |
| General And Administraive Cost | 1116 | 1105 | 1105 | 1105 | 1105 | 1105 | 1105 |
| Research and Development Cost | 100 | 38 | 38 | 38 | 38 | 38 | 38 |
| Depreciation Cost | 131 | 104 | 104 | 104 | 104 | 104 | 104 |
| Income from Ops | -409 | -197 | 262 | 1096 | 1349 | 1578 | 1752 |
| Other Income | 43 | 46 | 35 | 35 | 35 | 35 | 35 |
| Total Income From Cont Ops | -366 | -151 | 297 | 1131 | 1385 | 1613 | 1787 |
| EPS | -0.16 | -0.07 | 0.13 | 0.48 | 0.59 | 0.69 | 0.76 |
| PPS | 10.15 | 38.69 | 47.38 | 55.18 | 61.38 |
Please also check out these links for more facts. For IP and VRS growth rate see Feb 27 2006 8K. This filing is for HandsOn merger. The meger was later terminated by HandsOn. The reason of termination is unkown to the public. My guess is the huge VRS growth this year caused HandsOn to feel short changed in the merger. For Q2 and Q3 IP Relay revenue. see 2006 Q2 10Q and 2006 Q3 10Q For the competition and HandsOn merger termination, see the "competition" section and the section above in this 10K 2005 10K For their latest VRS beta, see i711 VRS. For FCC comments about VRS, see FCC Commissioners' comments
Like any stock speculation, there are risks involved. The biggest risk I can see is FCC changing the rate too often and adjust it too low. While I don't think it is a threat, but use your own judgement. Read this link for more details FCC Document
Note:
1) PPS is calculated using a PE of 20 on the extrapolated annual EPS from quarterly EPS. For instance, Q4 of 2006 has a quarterly EPS of 0.13. 0.13 x 4 x 20 = 10.15.
2) IP Relay, VRS and other revenues are net revenues after substracting the cost of these revenues.
3) The IP Relay Net Growth Rate is cut by 20% for 2006 Q4, then 10% and 5% in following quarters until it is 5%.
4) VRS initial net revenue is based on the quarterly IP Relay revenue after the initial IP Relay launch. Since the dollar ammount of VRS is 3+ times bigger than IP Relay. They should make $936k (312k x 3) in 2007 Q1 if they can match the performance of their IP Relay launch. To be conservative, I cut it by half -- 468k. The VRS growth rate is also cut to 15% -- In the first few quarters of IP Relay launch, they grew by 25% average per quarter.
5) Other Revenue should grow at least by 100k in Q4 and Q1 of 2007. These two quarters are best quarters for commision revenue. They had 200k more last time. After 2007 Q1, I change it back down. The company has guided in their 10Q that this revenue will grow. So my estimate is conservative.
6) Sales & Marketing cost changes quarter by quarter. Sometimes it drops. 2006 Q3 has a 40% increase than Q2. It is an anormaly because they started doing VRS marketing without any revenue to offset it. Down the road, I assume they will grow that cost by 100% a year, which is their growth rate of this past year. This translates to a %15 growth quarter over quarter. The growth rate should go down as IP Net growth rate goes down and VRS growth rate stays at 15%.
7) G&A, R&D costs stays the same. The company has guided in their 10Q that these costs will go down as they continue to cut cost, bring R&D work in house.
8) Depreciation. I used the same number as in Q3. This can either go up and down.
9) Other Income. 2006 Q3 is 46k. Q2 is 30K. I just gave a 35k. This can either go up and down .
This column is for information and educational purpose only. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. ¶ 10:52 AM
Comments:
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Zi - I spent some time this weekend going over your numbers for GOAM, and going through past SEC filings. Bought GOAM recently. Think your numbers are reasonable except for your estimate for Marketing Costs.
The 10-Qs for Q2 and Q3 2006 both say marketing costs will increase as a percentage of sales through 2006. Q2 marketing costs were 11.9% of revenue, Q3 costs were 15.1% of revenue. If Q4 marketing cost increase to 19% then total costs could be as much as $1,139 based on Relay revenue of $4,895.80 (40% increase from Q3) and Other revenue of $1,100 (my estimate). If that is the case Q4 could show a net loss of $85K and EPS -0.03.
Of course, if Relay revenue increases 60% sequentially, even with 19% marketing costs, there would be a very nice profit.
Interested in your comments if you have time. Thank you.
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The 10-Qs for Q2 and Q3 2006 both say marketing costs will increase as a percentage of sales through 2006. Q2 marketing costs were 11.9% of revenue, Q3 costs were 15.1% of revenue. If Q4 marketing cost increase to 19% then total costs could be as much as $1,139 based on Relay revenue of $4,895.80 (40% increase from Q3) and Other revenue of $1,100 (my estimate). If that is the case Q4 could show a net loss of $85K and EPS -0.03.
Of course, if Relay revenue increases 60% sequentially, even with 19% marketing costs, there would be a very nice profit.
Interested in your comments if you have time. Thank you.
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