Here's A Shorter's Analysis
1. Any new business venture starts with sales of zero. The first year that they have sales, it's an infinite percent increase over zero. That's just a mathematical quirk and doesn't mean that future year's growth will be infinite.
2. SKYM opened their web site during the 4th quarter of 1997, and didn't promote it much in the paper catalog. So, in 1997 they had less than a quarter's worth of revenue, for an unknown website. Obviously, a full year's sales in 1998 should be more than 4 times the fractional quarter's sales in 1997. It is really deceptive of the company to announce a 600% sales increase and forget to mention that they are comparing a full year to a small fraction of a year.
3. When a company puts out such a deceptive press release, it is probably intended to pump up the stock price. The only reason someone would want to pump up the stock price is if they want to sell some shares. I predict insider selling will be announced soon.
4. It appears SKYM is being actively pumped, by the company itself and by others. For example, on this very board last Thursday, Goldfinger claimed that news of an alliance with Amazon had just been announced. That news is noticeably lacking from today's press release.
5. Some indeterminable fraction of web sales are "stolen" from the catalog sales. Someone who takes a catalog off the plane may chose to order over the web instead of over the phone. If there was no web site, they would have ordered over the phone. The phone sale is lost to the web. The real indicator of growth is total sales, which is up only 7% for 1998. They are barely keeping ahead of inflation.
6. The company points out that gross margins are over 50%, but fails to mention net margins, particularly the net margin on internet sales. How much to you think they spent this year on web site development and maintenance, in order to get $2.1 million in sales? All those additional operating costs make web sales a net loss for the company.
7. I don't know where we will close today, but I know the high will occur near the open. I'm short at 17+ already and will be selling to the suckers at the open today. |
