TPS Trade Alert – May 17, 2013
May 17, 2013
Recommendation:
Buy Glowpoint (AMEX: GLOW) up to $1.20 per share.
Trade Rationale:
One of the benefits of investing in small companies is you tend to know exactly what you’re investing in. Small companies tend to focus on just a few, specialized products.
On one hand, it means small businesses aren’t typically as diversified as big companies. But, it also makes it much easier for investors to analyze a company’s market/growth potential.
What’s more, smaller firms ability to focus on a certain niche or silo of products or services makes them better pure play investments. Once again, you know exactly what you’re investing in. For example, a small gold miner is just a gold miner, not a gold/silver/copper/rare earths miner.
However, in this case, we’re not looking at gold. Instead, the company we’re recommending is the only pure play on the market in the cloud video service space.
Introducing Glowpoint (AMEX: GLOW).
GLOW is the leading provider of cloud and managed visual communications solutions in the US. The company’s primary offering is called OpenVideo, a cloud-based platform that provides telepresence, video, and unified communication users a way to meet and communicate across various platforms and carrier networks.
The company also provides various other products and services related to video communications and conferencing over the cloud. And as I mentioned earlier, it’s the only pure play provider of video cloud services in this space.
Moreover, there are several other reasons to like the direction GLOW’s headed.
Glowpoint was one of the first – if not the first – company to focus on the video conferencing space, particularly telepresence technology. Telepresence is the type of technology that allows a person to feel or appear present at a place other than their true location.
It’s a growing trend in video conferencing as more and more conferences veer away from the in-person model. As a first mover in this space, GLOW has a big network and favorable name recognition.
Getting back to the industry’s growth, cloud video conferencing services are growing like crazy. GLOW predicts the market opportunity to expand by 38% per year. Clearly, that’s a huge opportunity for expansion.
Finally, Glowpoint has a strong business model. Revenues are recurring, which makes it much easier to manage the company’s finances. Plus, the business has solid operating cash flow.
Speaking of financials, in the most recent quarter, revenues increased 26% year over year to $8.5 million. Most of the growth was due to an acquisition by the company in October 2012.
However, it’s not just revenues growing. Adjusted EBITDA grew by 17% from a year ago to $837,000. It’s a great sign management’s recent acquisition was a shrewd one.
Despite all the positives for GLOW and its industry, the stock is trading at rock bottom prices. In fact, at a current price of $1.00 per share, it’s significantly below the 52-week high of $2.41.
Not to mention, the shares traded over $2.00 for most of the period between 2010 and 2013. And, the 200-day moving average is also hovering around $2.00. In other words, there’s plenty of upside potential with GLOW.
Now’s your chance to grab this pure play on cloud video conferencing services while it’s trading near its lows.
Remember to use limit orders when placing your trades. And stick to your position sizing rules.
Key Facts:
| Company: | Glowpoint |
| Ticker: | GLOW |
| Recent Price: | $1.00 |
| Market Cap: | $27.7 million |
| Avg. Daily Volume: | 17,427 shares |
Chart:
Category: TPS Trade Alert
