Thursday, January 12, 2017

New Report on Cogint: "Fluent Maintains Momentum as idiCORE Takes Hold" $COGT

Barrington's James Goss published a new report today on Cogint (ticker: COGT) entitled "Q4 Preview: Fluent Maintains Momentum as idiCORE Takes Hold". Key excerpts:
  • Raising PT to $6.00 (from $4.25) 
  • Importantly, our revenue estimate from idiCORE jumps to $18 million in 2017 from $5 million in 2016.  
  • idiCORE’s potential contribution: While even the much larger 2017 figure remains modest in context, this does represent the early stage of establishment of the business operation that is the center of cogint’s value creation – the activity that provides justification for outsized gains.  
  • Further, understand that the process of establishing idiCORE will involve puts and takes with regard to the cost side of the equation. Specifically, as idiCORE reaches critical mass, the ability to leverage fixed data costs creates accelerating profit growth. However, in the early stages of this growth cycle involving a number of verticals that can be established and later benefit from such cost leveraging, the verticals must be prioritized as to the order and pace of introduction and when to incur the data costs that can subsequently be leveraged. The periodic incurrence of data acquisition costs for the sake of establishing the next vertical in the prioritization scheme indicates revenue and profit growth patterns will necessarily be somewhat lumpy. While faster growth earlier on could be achieved by focusing on a smaller number of verticals, this approach would come at the expense of a more complete execution of the available business opportunities. Ultimately, we feel this phased approach is the correct one.  
  • Virtually all current value in COGT is derived from Fluent since idiCORE is not yet contributing materially to results; meaning all of the potential value of the emerging idi unit is “FREE". We expect idi operations will enhance this valuation potential over the next several years, moving to a 2018‐based target of $10 and a 2019‐ based value of $15. This rapid progression provides a compelling reason to own this stock.
Goss' most recent December report is HERE.

More on Cogint HERE.

Disclosure: Long

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