Long-time readers should note some significant changes in how I communicate in the public domain. The primary purpose of this forum is now to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.
Accordingly, this document should not be construed as an endorsement or recommendation of the companies or securities discussed herein. I am not an investment advisor and this is not an investment thesis. It is merely one part of the story, which I present for debate in hopes of determining all risks and upside potential. The disclosure at the end of this piece is critical to understanding the content of this document. Further, I frequently trade my positions and may buy, sell, or short the securities mentioned herein at any time, regardless of the facts or perceived implications of this article.
With Smith Micro’s (SMSI) earnings report coming on Wednesday, momentum appears to be building in its relationship with Sprint. This weekend delivered a new slate of data points for our investing and trading pleasure.
From what I’ve seen, Sprint employees have now (finally) been instructed not to reveal an exact sunset date for Family Locator (the product SMSI is replacing). That’s a smart move on their part, because they’ve been working hard to engineer a smooth transition. However, this isn’t stopping them from making comments like this:
In the meantime, people have noted that Family Locator continues to receive updates. Many are speculating that it’s to urge customers to switch over to Safe & Found. The latest download rankings lend credence to that view. Over the past week, Safe & Found has started streaking up the charts:
Piecing it all together, Safe & Found’s latest version appears to have finally hit the sweet spot. According to Sprint representatives, the app’s one-star reviews has been dominated by customers who either don’t want to switch apps or don’t feel that they need the new functionality (parental controls, etc).
As I’ve reported before, one-star reviews represent just 0.21% of downloads to date (just 1 for every 476 downloads). Since April 16, that number has improved by nearly 33% to 0.15% (1 for every 678 downloads).
In other words, the one-star reviews has virtually no value to anyone assessing Safe & Found or Smith Micro’s shares.
To the contrary, anyone looking at the Safe & Found reviews as a time series (the proper way to look at it) can see that Safe & Found’s reviews are moving quickly, markedly, and consistently up.
Perhaps this is why Bill Smith and board member Andrew Arno made such generous concessions as part of SMSI’s March offering:
It basically says that Smith and Arno agreed to convert their preferred shares into common shares (eliminating their right to the 10% payouts) while also agreeing that the converted shares can not be registered for sale. They also agreed to a lock-up, so they can’t even think about selling shares until September. Last but not least, the maturity dates for their promissory notes (debt) got moved out from 2017 to 2020.
Clearly, everyone involved with the negotiations had to feel confident about the business to agree to such concessions without receiving anything (aside from the new funding) in return.
Finally, it is now crystal clear why the latest round was priced above the market. In light of the concessions and pricing of the prior round (which weren’t replicated in last week’s round), we can only conclude that SMSI has a new accretive acquisition imminently queued up. We can only speculate as to what they’ll be buying, but the sense of urgency suggests that it might be something they can immediately leverage into their Sprint relationship.
Unlike the last round, CEO Bill Smith appeared pleased with this round and hinted that 1) an acquisition is indeed planned and 2) things are accelerating at SMSI:
In the meantime, the shares have become a lot more interesting for traders. The chart shows a pretty clear pattern / channel. Further, the spikes and dips have both proven playable for anyone interested in trying to make a little extra cash on the side. Things should get even more interesting as the lower support line converges with the 50 and 200 day moving averages, which proven supportive in recent days.
So, what can we expect from Wednesday’s earnings call? Well, obviously Q1’s numbers won’t show a lot of movement (yet), because much of Sprint action has occurred since the end of Q1. However, management’s commentary and guidance should be quite upbeat.
Some key reasons to expect a positive call center around a lot of information we’ve recently gathered:
- Location Labs sunsetting soon
- Safe & Found download rank spiking
- SMSI’s above-the-market offering for what is anticipated to be another accretive acquisition (because the company doesn’t need that much cash for any other reason).
- Mr. Smith appears pleased with everything that’s happening for the company. He’s the largest stakeholder and will have the opportunity to tell investors why on Wednesday evening.
There’s a lot more than this to share, but I’m still gathering supporting data points and formulating how to present it all. Suffice it to say that Safe & Found isn’t the only game in town for SMSI.
In the meantime, investors should continue to expect some compelling trading opportunities. The intraday volatility, growing volume, and SMSI options provide an array of ways to augment a buy-and-hold / core-holding approach. I may present some of the more compelling ones in the near-future.
- Smith Micro Raises $7 Million (At A Premium) To Accelerate Its Momentum
- Sprint FINALLY Ramping Up SMSI’s Product!
- Videocast: AEHR 10-Q, MoviePass Update
- AEHR Grows 175% — Beats On The Top & Bottom Line (Buying More)
- GAIA vs. MoviePass: CAC Shows Which One Is A True Mini-NFLX
- Major Update on SMSI
- SMSI’s Safe & Found App: 100,000 Downloads & Counting
- MoviePass Projected To Burn $600M In 2018
- SMSI: Riding A New Trend & Making Its Latest Comeback
- Mark Gomes Research
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Disclosures / Disclaimers: I am long SMSI. However, this is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article.
I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.
I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter. Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.
I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.