When Warren Buffett first began investing, he used technical analysis for the first 8 years. It took him 8 years to figure out that technical analysis doesn't work. According to Buffett, "I realized that technical analysis didn't work when I turned the chart upside down and didn't get a different answer."
After 8 years of losing money by investing based on technicals, Buffett began investing based on the strategies of Ben Graham, a famous investor who invested entirely based on business fundamentals. What Buffett realized is, when you buy shares of a stock, you are buying a percentage of an actual business. Technical analysis pays no attention to a company's business. Stocks aren't about lines on a chart, moving averages, or fibonacci indicators. To understand a stock, you need to understand its business.
What Buffett also learned is that the market isn't there to instruct. While technical analysis investors listen to the market, Buffett realized that the key to success was taking advantage of the market by realizing when it is wrong and improperly valuing a business too low. In 2003, McDonalds (MCD) fell to $12 during the Mad Cow scare. MCD's technicals told you that it was going bankrupt and to sell the stock. However, an investor who understood MCD's business and fundamentals - and how it had a global footprint with stores in 119 countries - realized that MCD will never go bankrupt and as soon as the Mad Cow fears were gone, MCD would rapidly recover, which it did. MCD hit a new all time high this year of $102.22 per share.
NIA is sure that fundamental investors who load up with Synacor (SYNC) today and early next week will make a fortune in the short-term. (NIA isn't an investment advisor and doesn't make stock buy, sell, or hold recommendations.) Fundamentally no matter how we look at SYNC it is going to become a $20+ stock - most likely by year-end. When SYNC ran from NIA's suggestion price of $8.84 to $18, it had a very strong chart and bullish technical analysis indicators. SYNC flew easily from $8.84 to $15, and after finally breaking through its $15 resistance it quickly soared to $18.
When SYNC reached $18, its lock-up expiration was ahead in one month - which would allow venture capital firms that invested 10 years ago to cash out some of their shares. Short sellers knew that this event would temporarily pressure SYNC down for a couple of weeks, so they not only sold short every share available to borrow - but they illegally naked shorted SYNC by selling shares that they failed to borrow - which meant that shares were sold that didn't even exist and this artificial selling pressure drove SYNC down. If SYNC didn't have its lock-up expiration ahead and the stock wasn't illegally naked shorted, it would probably be trading for $20-$25 per share today.
SYNC's weak technical analysis indicators have held SYNC down below $8 in recent weeks. Many investors have ignored SYNC's unbelievably strong fundamentals and very rapid growth, because the market is instructing them that SYNC's 3Q results and 4Q guidance will be disappointing and weak. With SYNC currently down 58% from its high of $18, it technically looks like their business has fundamentally collapsed - but this couldn't possibly be any further from reality.
Unfortunately, very few investors have taken the time to research SYNC in order to understand its true fundamentals. NIA has done more research on SYNC than anybody in the world and has the best understanding of SYNC's business and fundamentals. SYNC's fundamentals will overtake its technicals 2 1/2 weeks from now when SYNC reports 3Q results and 4Q guidance, allowing SYNC to finally rise back to where it belongs.
SYNC's 3Q revenue guidance of $28-$28.5 million vs. initial estimates of $30.5 million is not nearly enough to justify SYNC currently being 41.4% lower than July 25th (when it closed at $12.96). Fear of SYNC's August 13th lock-up expiration caused SYNC's shareholders to dump their shares leading up to and after 2Q results. SYNC's slide continued due to new shares entering the float from the lock-up expiration, and weak technical analysis indicators have temporarily prevented bargain hunters from loading up with these shares until after SYNC releases their 3Q results and 4Q guidance. NIA members will learn 2 1/2 weeks from now that a weak looking chart does not indicate a weak business and deteriorating fundamentals. SYNC is the perfect opportunity based on Buffett's strategy that made him a multi-billionare.
Buffett rarely invests into technology stocks and SYNC would simply be way too small for him to invest into anyway, but by year-end the whole world will recognize NIA as a mini-Buffett. NIA's Broadvision (BVSN) gained 579% earlier in the year, and SYNC appears set to gain between 150% and 200% from its current price between now and the end of December. Next year when pay-TV operators are done signing their new distribution deals with content providers that include multi-screen TV Everywhere rights, TV Everywhere will actually become TV Everywhere - and Americans will embrace it more rapidly than they did social networks.
SYNC's fundamentals have improved dramatically since it rose to $18 per share in July. When SYNC was $18 per year in July, it had a market cap of $486 million, trailing revenues of $103.04 million, and a price/sales ratio of 4.72. Today, SYNC's trailing revenues are $114.38 million and a price/sales ratio of 4.72 would value SYNC at $19.98 per share. Currently at $7.59 per share, SYNC's market cap is only $204.93 million and its price/sales ratio is only 1.79.
SYNC was originally supposed to go public at an IPO price of between $10 and $12. Unfortunately, SYNC received absolutely no media attention at the time of its IPO, and the huge buzz about TV Everywhere didn't begin until a few months afterwards. Fundamentally, SYNC was a lot stronger than most of the other cloud computing IPOs from earlier this year. However, because SYNC received no attention in the media and there was no TV Everywhere buzz at the time, its IPO price was 50% below the low-end of its offering range. Immediately after going public at $5, SYNC's management loaded up with their own stock at $5 and SYNC rose to $6.37 the first day of trading. SYNC is the only cloud computing IPO this year that had major insider buying after its IPO.
At the time of SYNC's IPO, its trailing revenues were only $80 million. This means at $6.37 on its first day of trading, its price/sales ratio was 2.15, and the stock was completely undiscovered with no following whatsoever. A price/sales ratio of 2.15 would today value SYNC at $9.11 or 20% above its current share price of $7.59. In the extremely unlikely event SYNC misses 3Q results, NIA is sure it will still finish October well above $9.11. SYNC at its current price is the most undervalued it has ever been, and we are now at the very beginning of SYNC's biggest quarter in history!
SYNC is fundamentally stronger than ever and SYNC's 3Q results will benefit BIG TIME from NBC's Olympic TV Everywhere coverage - the biggest TV Everywhere event in history that broke all TV Everywhere records - and caused SYNC's July and August traffic to soar through the roof. SYNC worked closely with NBC by providing access for 25 million pay-TV subscribers. The Olympics weren't included in SYNC's guidance, which is why NIA is so extremely confident that SYNC will shock Wall Street in 2 1/2 weeks! Perhaps the biggest shock will be SYNC's 4Q guidance. Analysts are estimating that SYNC will generate 4Q revenues of $33.51 million up 18.2% from 3Q revenues of $28.34 million, and they issued these estimates before SYNC signed their HUGE ad deal with Comcast that will probably have a MAJOR impact on SYNC's 4Q revenues and profits!
For the last 5 trading days straight, SYNC hasn't traded a single share below $7.50. This is an extremely bullish sign that SYNC's inevitable explosion above $8 is imminent. At any time a major institutional buyer could come in and take a big position that pushes SYNC to $9 in a day. Don't underestimate SYNC's huge following of wealthy investors on the sidelines who have been researching SYNC for the past 2-3 months. Look how easily SYNC reached volume on Monday of over 1.1 million shares on a very small breakout.
In NIA's opinion, a very big SYNC breakout is almost guaranteed to occur within the next week and a half, but it could literally occur as soon as today - we just don't know! This is why we feel bad for daytraders who sold on Tuesday and are watching from the sidelines. SYNC obviously isn't going any lower so they have nothing to lose by owning SYNC, but by waiting on the sidelines they will most likely miss SYNC's HUGE breakout that could occur during any hour of any day - including today.
Buffet wasted 8 years of his life with technical analysis. He would probably be a trillionaire today if he became a fundamental investor like NIA, 8 years earlier than he did. Don't make the same mistake as him. Learn from his mistakes and successes.
NIA is not an investment advisor and is not making any target prices or financial projections. Never invest based on anything NIA says. Always do your own research and make your own investment decisions. NIA never recommends to buy or sell any stock.
Disclaimer: NIA currently owns 486,035 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.
NIA is not an investment advisor. This email is not a solicitation or recommendation to buy, sell, or hold securities. Never make investment decisions based on anything NIA says. This email is meant for informational and educational purposes only and does not provide investment advice.
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