TPS Position Update – March 2, 2016

| March 2, 2016

TPS Position Update

. . . . . Bluelinx Holdings Inc. (NYSE: BXC) – Sell

After a long stretch of missed opportunities to take advantage of growth in the new home construction market, we have lost confidence in Bluelinx.

The struggles have become more than we can reasonably expect the firm to overcome.

On January 26, 2016, the firm’s stock was delisted from the New York Stock Exchange. It’s average global market capitalization over a consecutive 30 trading-day period fell below the required $50 million mark.

At the time, the firm announced its intention to turn this around. It hasn’t happened.

Neither has a necessary uptick in sales.

To try and hang on, the firm has renegotiated terms on a $159 million real estate loan, which has been extended for three years.

Bluelinx has been unable to compete and win in a market that has been fairly healthy. Net income is trending down. The future is grim and its best for us not to be a part of it.

. . . . iPass. Inc. (NYSE: IPAS) – Hold

Shortly after we recommended the stock at $0.90 in October, it shot up to $1.06.

Since then, it’s been a downhill run.

Today iPass trades at $0.98, coming off a low of $0.83 last month.

iPass is not simply a victim of the downturn in tech stocks. It needs to start making money again.

The good news…

We are happy to see operating expenses trending down. Excluding the cost of restructuring charges, they fell $14.2 million or 24% in 2015 compared to 2014.

Q4 revenue came in at $15.4 million. Annual revenue for 2015 was $62.6 million. The adjusted EBITDA loss was $1.4 million for the quarter and $7.3 million for the year.

When we recommended iPass, we knew the firm was in the midst of housecleaning. So far, we have not been thrown any curves. The strategic direction of the firm appears sound.

We like the marketing initiatives supporting its three core WiFi products, UNLIMITED, EVERYWHERE, and INVISIBLE.

According to President and CEO Gary Griffiths, “We believe 2016 will see our first year-over-year revenue growth since 2007. Moreover, we expect to be adjusted EBITDA profitable in 2016, which we believe would be the first time in the company’s history.”

For the current quarter, the firm is forecasting total revenue in the $14.7 – $15.5 million range, and an adjusted EBITDA loss of $1.5 – $2.5 million.

Action To Take

  • Sell Bluelinx Holdings Inc. (NYSE: BXC)
  • Hold iPass Inc. (NASD: IPAS)

Category: TPS Update

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