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Sounds like you have a good background on this stock. Can you...

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Bayswaterguy

1,737 Posts.

106

22/11/18

18:24

Post #: 36607747
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Originally posted by goldbear77 ↑

think its impossible to judge until you get 2 more quarters. cash burn has steadily risen from what was about $3m to now close to $4.5m/qtr over 12 months

at same time revenue is also rising - but at this stage its roughly proportionate - ie cash burn is rising roughly (v roughly) as much a revenue

ICQ is a good cautionary tale on a stock like this - has kept making incremental revenue growth but costs rising in line so breakeven nowhere near. as you can see that one did something similar to BUD's recent planking effort - spent about a year going sideways around 20c - but recently broke down once market felt the risk of a CR was within 6-9 months and breakeven a remote risk

BUD has a bigger cash reserve relative to burn on hand so id say it has 2 more quarters of grace where it can just do nothing before market will make its mind up

one of the challenges with new business models is mgt will generally never tell you the cost of the incentives they are paying to get distribution - frequently to get product sales moving they have to share more with the distributor. dont know if that might be the case with BUD - seems likely to me given the lack of any effort from most 3rd parties that was evident post all the initial signings and the way costs have escalated

$4.5m/qtr is pretty heavy burn for a small cap tech - though ICQ is at $6m/q - but around ~$3.5m/q revenue. So its actually closer to breakeven on relative basis.

More often than not such high cash burn relative to revenue is a sign that mgt is paying too much in salary that it will then look for shareholders to fund.

The critical thing as always is whether the revenue curve makes a sudden leap toward the burn rate. Thats what I;d use the next 2 qtrs to look for

Given market is lowering its valuation of tech and growth stocks overall - there's not likely to be any need to hold this until it proves the conceit

Frequently what you get are unexplained selloffs in SP right before launch point - as insiders game the sp. So i;d probably look for that - an unexplained rip down to 8c or so followed by high churn accumulate would probably be a tell that funds are looking to get set for a catalyst event - though worth charting the fib ratios to check the likely bottom sp they will use

if tech p/s ratios are contracting from 10x to 5-7x then you can expect funds would be looking for a sub $100m mkt cap - more around the $50-$70m mark inclusive of cash i think they would then regard as fair value and cheap/good buying if the stock was starting to get meaning earnings/burn expansion

atm its overpriced but holding - and with stocks like this the carrot is you never quite know if the next quarter might be the magic quarter

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Sounds like you have a good background on this stock. Can you tell me please what the last Q on Q rev % was? And what was the previous Q on Q rev % before that please?

BUD Price at posting: 10.5¢ Sentiment: Buy Disclosure: Held
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