TPS Position Update – July 6, 2016
. . . . REVOLUTION LIGHTING (RVLT) – SELL
We recommended the stock last October at $0.86. Earlier this year, the stock went through a reverse 10-1 split. Yesterday, it closed at $6.50.
What went wrong?
In a nutshell, the company figured it was closer to signing some big deals with the U.S. military than was actually the case.
The company as much as admitted the problem earlier this month when it brought in a new head of sales.
Big deals we expected to come through, based on the company’s guidance, haven’t been inked. Could they come through in the future? Perhaps. We like the Revolution product, LED lighting. There may be enough business from private sector contractors, distributors, and agents for the company to make a go of it.
But for now, too many uncertainties have piled up. In Q1, the company lost $2.6 million. Long-term debt continues to pile up, and now exceeds $25 million.
The firm is now forecasting stronger revenue guidance for the rest of the year. It’s gone up to $180-$190 million.
We’re skeptical.
This is a good time for us to turn off the lights, sell Revolution Lighting, and move along to more promising opportunities.
. . . . REACHLOCAL INC. (RLOC) – HOLD
We recommended ReachLocal at $1.86 in April. Today, RLOC closed at $4.57.
That’s a 146% profit for our subscribers in less than three months. What happened?
The company is being acquired by Gannett Co. Inc. (GCI), the major media firm best known for publishing USA Today.
Gannett has agreed to pay $4.60 a share. If you followed our recommendation and acquired ReachLocal at $1.86 a few months ago, we are advising you to hold onto your shares.
Take Gannett’s $4.60.
Meantime, ReachLocal has been through ups and downs. Q1 2016 was a mixed bag. The company lost $6.1 million – not what we want to see, but losses have been cut in half since Q1 2015. During Q1 2016, the company burned through $5 million in cash.
The company is in the marketing business. It makes money by selling marketing solutions to smaller, local businesses so these local firms can generate online leads and convert these leads into prospects.
Software branded as ReachEdge uses tools such as text alerts and emails to give local entrepreneurs some of the tools used by larger, more marketing savvy marketers.
In April, ReachLocal released a new product, ReachSocial Ads™, a Facebook advertising solution for local businesses.
The firm operates in four regions: Asia-Pacific, Europe, Latin America, and North America.
Action To Take
- SELL REVOLUTION LIGHTING (RVLT)
- HOLD REACHLOCAL INC. (RLOC)
Category: TPS Update
