|May 2nd, 2012:|
Synacor Inc (SYNC)
Current Price: $8.84
NIA already owns a large position in its new stock suggestion. Please see our disclaimer at the bottom of this email for information on the amount of shares we own and our intent to sell our shares.
SYNC's customer-branded platform enables cable, satellite, telecom and consumer electronics companies to deliver TV Everywhere, digital entertainment, services and apps to their end-consumers, strengthening those relationships while monetizing the engagement.
The hottest stocks on Wall Street this year are cloud computing plays and NIA believes SYNC could become one of the biggest cloud computing winners of 2012. SYNC just went public in February at an IPO price of $5 and has been starting to break out in recent weeks after reporting unbelievably strong 1st quarter results. NIA considers SYNC to be insanely undervalued compared to all other 2012 cloud computing IPOs.
SYNC's integration, authentication and engagement platform enables cable, satellite, telecom and consumer electronics companies to deliver digital entertainment, services and apps to their own consumers, thereby strengthening those relationships while monetizing engagements. With 45+ customers, 21 million high-speed Internet households, 81+ million average monthly search queries, 2.8 billion average monthly advertising impressions, and 75+ content partnerships, SYNC delivers a compelling consumer experience across multiple devices.
SYNC has only 26.74 million shares outstanding and a market cap at $8.84 of $236.38 million. SYNC has grown their revenues from $39.9 million in 2007, to $52.6 million in 2008, to $60.8 million in 2009, to $66.2 million in 2010, and $91.1 million in 2011. SYNC recently reported record 1Q 2012 revenues of $30.7 million, up a stunning 64% from 1Q 2011 revenues of $18.7 million. SYNC announced that they expect full year 2012 revenues to equal between $123 million and $126 million.
SYNC's 2011 revenues of $91.1 million were up 38% from 2010 revenues of $66.2 million. If SYNC generates $126 million in 2012 revenues they will achieve growth this year of 38% once again!
Let's take a look at the valuations of other recent cloud computing IPOs:
Guidwire Software (GWRE), revenue growth last year of 19%. Trading for 8.23x 2011 revenues.
Demandware (DWRE), revenue growth last year of 54%. Trading 13.44x 2011 revenues.
Infoblox (BLOX), revenue growth last year of 30%. Trading for 7.20x 2011 revenues.
Proofpoint (PFPT), revenue growth last year of 26%. Trading for 4.75x 2011 revenues.
Brightcove (BCOV), revenue growth last year of 45%. Trading for 8.23x 2011 revenues.
These 5 other cloud computing IPOs from this year have similar revenue growth to SYNC and they are trading with an average price/sales ratio of 8.37. If SYNC was trading for 8.37x their 2011 revenues it would have a market cap of $762.5 million and a share price of $28.51. If SYNC generates 2012 revenues of $126 million and trades with a price/sales ratio of 8.37, SYNC would have a market cap of $1.055 billion and a share price of $39.44.
SYNC is profitable with 2011 net income of $9.9 million. Of the other recent 5 cloud computing IPOs mentioned above, only GWRE is profitable. DWRE, BLOX, PFPT, and BCOV are all losing money.
SYNC just announced yesterday morning that it has acquired Carbyn, the HTML5 Platform that delivers a unified experience for apps across Net-connected devices including smartphones, tablets, laptops, and connected TVs. Through this acquisition, SYNC will be able to offer customers a branded platform where their subscribers can enjoy a variety of content and HTML5 applications including video, music, games, newspapers, and magazines seamlessly by signing into their account on any device regardless of operating system (OS) or browser. Carbyn fills a gap in the marketplace and is a vital piece of SYNC's TV Everywhere content strategy.
Josh Constine of TechCrunch says SYNC and Carbyn "are a great fit, a veritable match made in the cloud."
Intel (INTC) a $144 billion company is a major SYNC shareholder. Charter (CHTR) a $6.13 billion company is a major SYNC customer. CenturyLink (CTL) a $24 billion company is another major customer of SYNC. Toshiba (TOSBF) a $17 billion company recently became a major SYNC customer.
Disclaimer: NIA currently owns 478,427 shares of SYNC. NIA intends to sell these shares in the future and can do so at any time. NIA reserves the right to add to its SYNC position at any time.