August 4, 2017: Motley Fool Columnist Andy Gould Writes: What I'll Be Watching When Tucows Reports Earnings on August 8
Motley Fool Columnist Andy Gould published his fourth article about Tucows this year on August 4, 2017 and this article is about three key factors Gould says investors should watch when they set expectations for quarterly results that will be discussed in Tucows upcoming Quarterly Report on August 8, 2017.
First let's understand Gould's strategy in his trade. Gould says in his financial disclosure statement along with the article that he is short August 2017 $55 puts on Tucows. According to one financial analyst who is experienced in trading options, the best way to understand Gould's position is that when you sell a put like the August $55s, you immediately get the premium. According to the analyst the best outcome from that point is that the stock goes and stays about $55, so that at expiration the put expires worthless, your obligation to buy the stock at $55 goes away and the premium you received upon selling the put is all profit. "If the stock is below $55, the shares can be put to you, i.e. you are forced to buy them, at $55," said the analyst. "Your net cost is $55 less the premium received up front upon selling the put."
Here are Gould's three factors to watch for.
- Gould's first factor to watch is the acquisition of enom and how it is going. Gould says that "the acquisition will obscure some of Tucows' growth metrics for a while, as it makes year-ago comparisons quite complicated." Enom generated around $15 million in adjusted EBITDA, and Noss said that he expected to grow that to $20 million by the end of 2018, as Tucows integrates the two systems and wrings out inefficiencies in the combined businesses. Gould says he advises investors to listen for Elliot Noss to talk about any change in adjusted EBITDA guidance that is related to the enom acquisition and integration.
- Gould's second factor to watch for is strong subscriber growth in Ting Mobile's customers. Gould says that "Ting Mobile, grew 11.5% to $18 million. Ting -- which provides discount phone service without contracts -- added 5,500 accounts and 12,000 devices in the first quarter, bringing it to a total of 175,000 accounts and 280,000 devices." Gould advises to look for additional Ting Mobile growth when Tucows reports their second quarter on August 8, 2017.
If there was a way to post a comment to Mr. Gould's story at the Motley Fool Web Site, I would leave the following post for Mr. Gould.
Hugh Pickens writes: "I am going to disagree with Mr. Gould slightly on this factor. First I think Mr. Gould inadvertently sets up expectations that are too high for subscriber growth in ting mobile. The first quarter was an anomoly. There was a one-time influx of new customers from another MVNO that went broke. If you look at the two charts to the right you will see the "bump" in the first quarter and also see that the actual long term trend in net customer ads is declining. Subscriber growth in 2016 Q2, Q3, and Q4 were all under 5,000. With the new competition in the mobile market, I would be happy if Ting Mobile has 4,000 net ads in the second quarter. There is a good chance it will be lower."
"Looking long term, I really don't see outsize growth for Ting Mobile in the future but if they continue to focus on customer service as their key differentiator, Ting Mobile could be a cash cow for many years to come."
- Gould's third factor is growth in ting high speed fiber and by growth Gould is talking about new contracts. "Noss has stated that Ting will most likely announce two to three new fiber towns in 2017," writes Gould. "Look for how many additional serviceable addresses this would create, as well as any updates on Ting Internet's path to profitability. The current target date for profitability is late 2018 or early 2019."
For reference here is what Elliot Noss told analysts in answer to a question from Patrick Retzer during the 2017 first quarter earnings conference call on May 9, 2017 that "if I had to make a best guess, I think two to three [new fiber markets] would be about right. But again, I'll stress, we've got lots of work to do, it's what we have on our plate. And I'm quite fine if we don't announce anything. And there's lots of action out there, and so it could even be 3, 4, 5."
Note: This was the original paragraph 2 in the article.
When you short a put, you take on the obligation to buy shares at the put option strike price. This will occur if the stock is below the put strike price at the expiration of the contract, and it fits with a goal of buying the stock if it were to drop to a target price. Gould says in his financial disclosure statement along with the article that he is short August 2017 $55 puts on Tucows so Gould will make money if TCX goes down. Any TCX stock price below $55 before August 18 makes Mr. Gould money.
Previous Articles about Tucows by Motley Fool Columnist Andy Gould
- Motley Fool Columnist Andy Gould Writes Is Tucows the Best Small-Cap Growth Stock You've Never Heard of? April 22, 2017
- Motley Fool Columnist Andy Gould Writes: What to Watch When Tucows Reports Earnings on May 9 May 8, 2017
- Motley Fool Columnist Andy Gould Writes Three Key Takeaways From Tucows' Latest Earnings Report May 31, 2017