TPS Position Update – September 27, 2016

. . . . Abraxas Petroleum (AXAS) – SELL       

We recommended the stock in May at $1.34. Today, it closed at $1.62.

Too many headwinds have piled up.  It is time to take a 21% profit and sell.

Oil price instability has continued longer than we expected.  When we recommended Abraxas in the Spring, crude oil prices were firming.

Now, the analysts are looking for West Texas Intermediate crude to sell for $51 a barrel in 2017.  That’s a step in the right direction, and when spot pricing goes up, Abraxas benefits.

The problem is what the U.S. Energy Information Administration refers to as “…heightened volatility and high uncertainty in the oil price outlook.”

There’s no assurance oil prices won’t slide back into $40-$45 range.

Abraxas is fighting an uphill battle.  It is selling off assets to pay down debt.

The financials are rugged.  It just turned in its sixth straight quarterly loss.  In Q2, the company generated $11 million in revenue but lost $46.9 million.

Moving forward, making money on an oil company stock will be tough.  This is a good time to sell Abraxas. 

. . . . iPass (IPAS) – SELL 

We recommended the stock in October 2015 at $.90. Today, it closed at $1.66.

We would like to be cautious.  Selling at today’s market close of $1.66 gives you an 84% return.

iPass has performed as we expected.  In Q2, it trimmed its losses to $1.4 million, down from $3.7 million in Q1 and $6.4 million in Q2 2015.

Revenues have grown, up to $16.5 million for the quarter from $14.7 million in Q1 2016 and $15.6 million in Q2 2015.

The gross margin also grew, increasing to 37.9% from 35.2% in Q1, and expenses were reduced by 15%.

All the right things are happening at iPass, but we’re worried about the direction of the market.

There has already been a downturn in the tech sector.  Tech stocks took a late summer hit, but rebounded.  It is not unreasonable to expect another correction, which could easily be more severe.

Tech stocks are in a cyclical category.  Penny stocks like iPass could be more vulnerable to setbacks.  Things have been going well, so we’ll take our profits and move along. 

Action To Take

• SELL Abraxas Petroleum (AXAS)
• SELL iPass (IPAS)

Category: TPS Update