The technical aspects of this stock look very good. THNK broke out of a five month base into new highs today (March 20th) after having climbed over 20% during the last four days. Thus, it now has cleared its prior resistance level of 13.
In addition, the volume has been very, very heavy for two weeks, and in fact has been on a steady up swing on many times normal volume. This tells me we now have cleared out those who simply wanted to recoup their losses after the stock dipped from its prior highs of 11 to 13 back in October and November 1997. As a result, those still holding, and those who bought this last week, are committed to THNK's tremendous upside potential and will not be selling cheap.
The fundamentals for the company also are good. Frankly, I always look for companies with both good technical and good fundamental stats.
For those interested in the company, here's some facts:
A least as of last week, mutual funds were only holding 1% of THNK, and institutional investors held only 6%. I suspect, given this week's heavy volume, it's now higher. Regardless, the key issue is that mutual funds and institutions are only now discovering this company and now appear to be climbing on board BIG TIME. This indicates we will continue to see a good run up.
Shorts only hold 0.3 times normal volume. Thus, the longs are firmly in control (another very good sign).
Over the last three quarters, the company has gone from a loss to 0.05 EPS in the quarter ending Sept. 30, 1997, and then a 240% rise to 0.12 EPS in the 4th quarter 1997 verses a -0.19 loss for the 4th quarter 1996.
During this current quarter, THNK has entered into a number of very significant advertising and web design contracts with large companies like Network Associates. (For those who watch CNBC, I think THNK did the Russian missile silo ad for NA -- pretty impressive!) As a result of these big contracts and the resulting high visibility, I expect that THNK will be able to build on its recent profitability with an EPS for 1998's 1st quarter that will not only be high, but will exceed expectations. (Current ESP estimates for all of 1998 are only 0.40.)
Also, this is one of the few Internet companies actually beginning to show a profit. other Internet companies, which have a long time to go before they will show a profit, have had large run ups over the last month. In fact, IBD's relative strength for the sector is a high 91. I believe big money (like mutual funds and institutional investors) have now begun to recognize that THNK has at least the same future income potential as Yahoo and @Home (on a percent growth basis), but unlike those other companies, THNK has real profits in the here and now.
Finally, THNK has an IBD RS rating of 97, with an EPS rating of 75. Not bad for such a young company! With a float of only 2.5 million shares, there is going to be a very limited supply of shares with a very high future demand. Thus, if future buyers want in, they are going to have to pay premium prices.
Bottom line -- I believe THNK has the potential to double over the next several months (if not sooner). Hang on, its going to be fun ride! (And Zimmer -- do I know how to pick 'em, or what?) |
