GTT Communications: Seven Reasons To Avoid This Las Vegas-Style Bet
by Sonya Colberg, Senior Editor, 8/27/2015 10:33:18 AM
The market has grabbed GTT Communications (NYSE: GTT) under one arm and a fake Elvis under the other and headed for Las Vegas.
Managers have undoubtedly watched in shock as the market slapped a nearly $800 million value on the telecommunications services provider. Never mind that GTT is losing money and its forward price to earnings is an unbelievable 37 to 1. The market still insists on betting on GTT, humming “Viva Las Vegas” all the way.
But trouble lies ahead. Really, there’s so much trouble all around that a half-dozen happy Elvis impersonators couldn’t even beat the affects of investing in GTT at its current price of ~$22.
Investors may read other viewpoints here. Meanwhile, here are the top seven reasons GTT is due for a haircut and sideburn trim:
*1. From Shell To Risky Roll-up
Many of GTT’s financial issues can be traced back to its very foundation.
The company, formerly called “Mercator Partner Acquisition Corporation,” was simply a shell in 2005, looking for a business to run.
After it settled on providing telecommunications and Internet services, GTT began acquiring companies. It created 45 subsidiaries as it rolled up about half-a-dozen companies into its portfolio - including a division of MegaPath just last February that cost a whopping $144 million plus $7.5 million in GTT stock.
This undoubtedly difficult-to-manage assemblage of small companies has found itself scrambling to compete for a sliver of cloud-based business against established companies such as AT&T, Xo Holdings, Verizon and Microsoft.
TheStreetSweeper has seen many roll-up companies and despises most of them. We have warned investors about the fluctuations and risks associated with roll-ups such as Tangoe (TNGO $19.55 then, now ~$7), Swisher Hygiene (SWSH $8 then, ~$1 now) and Revolution Lighting (RVLT $4 then, now ~$1.).
So now we're inducting GTT into our Rock'n Roll-up Hall of Fame. But, first, let's look at the financial issues that GTT can thank for their help in making this unfortunate honor possible.
*2.Neck-Deep In Debt
GTT depends on a mountain of debt to keep the doors open – and feed its appetite for acquisitions.
The company is now shouldering $215.6 million in debt. Cash has dwindled to just $19.4 million. So the company's debt is over 10 times the cash in its piggy bank.
Now GTT is loaded with debt and losing buckets of cash.
*3. Net Losses Become Substantial
Indeed, GTT hasn't seen six months' worth of operations in the black since ... yikes! ... 2010.
The chart below, based on SEC filings, shows how GTT has consistently disappointed investors:
So GTT’s losses dramatically deepened beginning in 2013.
In fact, SEC filings indicate the company just suffered the second worst 6-month loss since the company’s inception a decade ago.
*4.Historical Earnings Misses
Last quarter, management credited GTT sales improvement primarily to acquisitions. But investors actually lost 32 cents per share – an enormous miss since Wall Street expected a loss of only 6 cents.
Energy Focus: Massive Risks Coming Into Focus
by Sonya Colberg, Senior Editor, 8/19/2015 3:23:50 PM
TheStreetSweeper alerts investors that the latest risk associated with Energy Focus Inc. (EFOI) stands to hammer the stock price.
EFOI stock went ballistic today – jumping by $2 in early morning trading to settle in the $16-$17 range. The rise coincided with Roth Capital Partners’ snap decision to raise EFOI’s price target 7 bucks to $23 per share.
While bulls may argue EFOI’s business and margin improvement sparked the analyst’s write-up, we believe something less obvious may be going on here.
EFOI has in its back pocket $25 million worth of registered stock that it can freely sell to the public at any time.
With its eye on a potential stock offering and seeing the stock price trading around record levels in recent days, we believe Roth saw an opportunity to help push EFOI higher.
Indeed Roth analysts had provided an update the day after EFOI released positive earnings on Aug. 5. So it seems odd that Roth would provide a new release two weeks later with unchanged sales and EPS estimates. No real new information. Just a new head-scratcher price target.
Now that the already over-valued stock has rocketed even higher, Roth figures it’s sitting pretty in the cat-bird seat.
JAMN Finally Spills the Beans -- And It's an Ugly Mess
by Janice Shell, 6/2/2011 10:32:51 AM
To be sure, the 10-K offered investors little reason to sing. For starters, the filing reveals, this once-hot “coffee company” sells no coffee of its own at all. JAMN relies on a supplier based in frigid Canada – far away from the tropical Jamaican home of its co-founder Rohan Marley – to provide the company with an actual product to sell to its customers instead.
Back in April of 2010, JAMN inked a “supply and toll agreement” with Canterbury Coffee of British Columbia that gave it access to some brew. According to that agreement, JAMN relies on Canterbury to fulfill every role – save a minor one – normally satisfied by a firm that classifies itself as a coffee company. Canterbury purchases the coffee beans. It roasts them. And it then packages them in bags supplied by JAMN – the company’s only real product – for sale to the public.
JAMN signed this deal more than a year ago, right before Shane Whittle – a notorious Vancouver stock promoter – officially resigned as CEO of the company. But the company never mentioned that agreement, seemingly material enough to warrant at least a quiet 8-K report, in a single regulatory filing until now.
Jammin Java (JAMN): Hot Stock ... Bitter Aftertaste?
by Janice Shell, 6/2/2011 10:30:25 AM
It’s time to wake up and smell the coffee! That’s exactly what Jammin Java (OTC: JAMN.OB), a heavily promotedcoffee company, and – for very different reasons – TheStreetSweeper would like investors to do.
Since the beginning of the year, JAMN has miraculously risen from the ashes of the “Grey Market” graveyard to become one of the liveliest – and richest – stocks in the entire microcap arena. JAMN has seen its stock shoot straight toward heaven, soaring from 55 cents to peak above $6 a share on massive daily volume, with its market value nowtopping $355 million despite the company’s limited resources and operating history. (As covered in more detail below, two of the Internet tout sheets pushing JAMN the hardest effectively vanished -- disabled by their Internet servers -- on the day the stock’s trading volume exploded past 20 million shares.)
CCME: Few Signs of Life at 'Healthy' Chinese Firm
by Roddy Boyd, 3/23/2011 9:30:34 AM
Also, and this cannot be understated, hanging out on a sidewalk in Fujian–the sidewalks double as parking spots when the streets, which appeared to have been designed in the Han Dynasty, fill up–was not a viable option. There was also the matter of the world-class headache the Financial Investigator was developing from Fuzhou’s diabolical smell, an epic conflation of poor sewage treatment, air pollution and the smell of cabbage that made getting the hell off Dongjie street a matter of vital importance.
The Financial Investigator and his traveling companion for the trip, an American investor with extensive experience in China, decided to head upstairs despite our interview with the CFO having been cancelled at the last minute (with no explanation given.) We thought a quick tour of the offices and meeting a few other executives might open our eyes to a few things.
Though the language barrier was a little steep with the young receptionist–when we asked for writing paper, she provided Kleenex–we were in short order shown to their conference room and told to wait. It did not escape notice that pride of place in the conference room belonged to a framed certificate of participation from the Fall 2010 Rodman & Renshaw conference, the World Cup for reverse merger companies and the pumpers and touts who peddle them.
Eventually chief operating officer James Yu came down and after spending 30 minutes trying to understand who we were, concluded that giving us a tour wouldn’t hurt. Soon enough, his colleague, Vinne Ye–the chairman’s assistant–came out and took us around.
It was most eye-opening.more...
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