TPS Position Update – November 10, 2015
. . . . Pendrell Corp. (NASD: $PCO) – Hold
The past few months have been challenging, but given the difficulties Pendrell is facing, the stock is holding up well.
Revenues were up in Q3 compared to Q2… $15.5 million against $2.1 million. A previous $7.6 million quarterly loss was cut to allow the firm to break even. This could have been a tidy profit if the company didn’t take a non-recurring charge of $7.1 million.
Last week Pendrell filed an 8-K with the SEC. This happens when a company that’s listed on the NASDAQ gets a delisting notice from the exchange. It files the form with The Securities And Exchange Commission to make this public.
These notices don’t mean a company’s stock will be delisted. But they are warning shots from NASDAQ, which wants share prices above a dollar.
Pendrell has been trading below the dollar mark for more than a month.
In mid-September, it was at $1.43. Then, in just one day, it plunged from $1.33 to $0.89.
What happened? A lawsuit over patent infringement didn’t go Pendrell’s way. Investors hoping for lucrative court-ordered settlements from Samsung and Google were disappointed.
But we do not like Pendrell simply because of the possibility of winning a lawsuit. We like its core business. This setback does not make Pendrell a less attractive business.
Pendrell is in the tech business. It invests in, acquires, and develops companies with unique technologies protected by intellectual property (IP) rights. It also manages digital IP licensing programs.
These core businesses and their value mean we’ll continue to hold.
. . . . Towerstream (NASD: $TWER) – Sell
Yesterday’s Q3 earnings report confirmed our suspicions. A few weeks ago we wondered how well the company is doing when it comes to reducing operating expenses and increasing revenues.
The Q3 loss of $8.5 million indicates that improved financial performance is not something we can expect to see in the near future. Losses for the year now exceed $26.2 million as expenses continue to grow.
Actual quarterly revenue continues to fall and YTD revenue trails 2014.
It is time to exit your position and sell Towerstream. The company has been unable to deliver the kind of revenue performance we need to see.
As recently as August 13th, the stock was trading at $2.02. Now it’s at $0.68.
Towerstream provides wireless services to business clients in New York City, Boston, Chicago, Los Angeles, San Francisco, Seattle, Miami, Dallas-Fort Worth, Houston, Philadelphia, Las Vegas-Reno, and Providence-Newport.
We’ll keep an eye on the firm, and if it’s ability to monetize its installations starts to show improvement, we may recommend revisiting this stock.
Action To Take
- Sell Towerstream (NASD: $TWER)
- Hold Pendrell Corp. (NASD: $PCO)
Category: TPS Update
