PROCERA NETWORKS, INC.
(AMEX: PKT) $0.82
OUTLOOK
Procera Networks is a Los Gatos, California based global provider of traffic awareness, control, and protection products and solutions for broadband service providers.
We find Procera attractive due to its strong and consistent revenue growth, its expanding customer base, its strong balance sheet and its increasing margins as well as the quickly growing market in which its products compete.
Furthermore, from a technical analysis view point, we believe the hot stocks for 2010 may be attempting to build support just below the $0.75 area. Therefore, should we be correct in our analysis and should this possible support area continue to hold, levels near this possible support area may offer long term investors an attractive entry opportunity.
The network traffic and service management solution company's growing portfolio of evolved DPI products are marketed under the name of PacketLogic.
DPI (Deep Packet Inspection) technology provides a network intelligence that permits effective business decisions.
DPI technology examines and identifies packets of data passing through an inspection point in the network and can be used in analysis of optimum network utilization, network protection and by offering advance differentiated services.
It should be noted that the DPI market has grown quickly over the past couple years and is expected to continue its strong growth into the future. Analyst expect the DPI market to grow from less $400 million in 2007 to over $1 billion in 2012.
Procera's DRDL (Datastream Recognition Definition Language) and evolved DPI products are built to provide the scalability, flexibility, as well as accuracy, control and protection that is required by large networks.
Additionally the Company's evolved DPI technology looks at bi-directional packet flows and its proprietary DRDL processing engine allows the use of off the shelf hardware rather than customized Application Specific Integrated Circuit based solutions.
The Company currently has over 600 customers located through out Europe, North America, Australia and Asia and its products and services are sold through a combination of direct sales and channel partners as well as a global network of value added resellers.
What's more, the Company recently added four global Tier 1 operators to its customer list as well as some prestigious universities in North America.
During fiscal 2008 ending December 31, 2008, the Company reported revenues of $11.524 million, an increase of 72% compared to sales of $6.673 million in 2007. Net loss for fiscal 2008 was $13.902 million compared with $12.481million in 2007.
It should be noted that gross margin for fiscal 2008 improved to 36.6% compared to 34.4% in 2007.
More recently, for the three months ended March 31, 2009, revenues increased 72% to $2.947 million from $1.715 for the comparable period of 2008. Net loss for the quarter was $2.334 million, down from $3.483 million for the first quarter of 2008.
Additionally, it should be noted that operating expenses decreased by $561,166 from $4.211 million for the quarter ended March 31, 2008 to $3.650 million for the quarter ended March 31, 2009.
What's more, gross margin for the three month period ended March 31, 2009 was 39% compared with 28% for the three months ended March 31, 2008.
For the quarter ending March 31, 2009, the Company reported cash and equivalents of $1.721 million and working capital of $5.272 million. It should be mentioned that $5.454 million of accounts receivables and $3.445 million of inventory make up a large percent of the short term assets in this working capital equation.
We believe the Company's working capital, cash on hand and income from operations are sufficient to cover any funding needed for operations in the foreseeable future.
Still, readers should be warned that failure by the Company to successfully obtain additional future funding if and when needed, may jeopardize its ability to continue its business and operations.
Also, readers should be aware that the Company competes in a highly competitive sector of the networking technology market and faces strong competition from U.S. and global companies with larger customer basis, greater name recognition, and significantly more financial, technical, and marketing resources.
Likewise, investors should be aware of possible technical obsolescence as more advanced products are developed that may compete against Procera's products.
Furthermore, a significant amount of Procera's sales are generated outside the United States. The Company could be adversely affected by fluctuations in the value of the U.S. Dollar against foreign currencies.
| Summary Data |
| 52 wk high | $2.40 |  Chart courtesy of StockCharts.com | |
| 52 wk low | $0.25 | ||
| One year return | -60% | ||
| Average Daily Volume | 178,800 | ||
| Shares Outstanding (mil) | 84.498 | ||
| Market Capitalization ($mil) | 69.3 | ||
| Insider Ownership | 6.7% | ||
| Annual Cash Dividend | 0.0 | ||
| Dividend Yield (%) | 0.0 | ||
| Risk level | High | ||
| Industry | Business Software & Services |
INCOME STATEMENT
(Dollars In thousands, except per share amounts)
| Full Year Ended December 31 | 2008 | 2007 |
| Revenues | $11,524 | $6,673 |
| Cost of Revenues | 5,310 | 4,380 |
| Gross Profit | 4,214 | 2,293 |
| Total Operating Expenses | 19,198 | 15,899 |
| Income (Loss) from Operations | (14,984) | (13,606) |
| Total Other Income (Expense) | 40 | 52 |
| Net Income (Loss) before Taxes | (14,944) | (13,554) |
| Provision for Income Taxes | 1,042 | 1,073 |
| Net Income (Loss) | (13,902) | (12.481) |
| Basic earnings (Loss) per share | $(0.18) | $(0.17) |
| Diluted earnings (Loss) per share | $(0.18) | $(0.17) |
| AVERAGE ANALYST ESTIMATE |
| Full Year Ended December 31 | 2009 | 2010 |
| Fiscal Yr | $0.05^ | $0.15^ |
 |
| COMPANY NAME | SYMBOL | INDUSTRY | DATE RECOMMENDED | PRICE ADDED | CURRENT PRICE (5/18/09 Close) | RETURN PERCENTAGE |
| Air T Inc. | AIRT | Air Delivery & Freight Services | 3/19/2008 | $8.96 | $7.90 | -11.8%* |
| Computer Task Group, Inc. | CTGX | Information Technology Services | 6/25/2008 | $5.018 | $4.86 | -3.2% |
| GSI Technology Inc. | GSIT | Semiconductor - Broad Line | 10/29/2008 | $3.30 | $3.308 | 0.2% |
| Jewett-Cameron Trading Company Ltd. | JCTCF | Lumber, Wood Production | 7/23/2008 | $6.75 | $4.90 | -27.4% |
| NAPCO Security Technologies, Inc. | NSSC | Security & Protection Services | 12/3/2008 | $1.41 | $1.25 | -11.4% |
| North American Galvanizing & Coatings Inc. | NGA | Industrial Goods | 3/7/2007 | $2.256** | $5.94 | 163.3% |
| Procera Networks, Inc. | PKT | Business Software & Services | 5/13/2009 | $0.80 | $0.82 | 2.5% |
| Santa Fe Holding Company, Inc. | SFHD | Restaurants | 5/7/2008 | $1.88 | $1.40 | -25.5% |
| SORL Auto Parts | SORL | Auto & Truck Parts | 5/5/2005 | $3.00 | $3.00 | 3#6699#6690.0% |
| UFP Technologies Inc. | UFPT | Packaging & Containers | 2/13/2008 | $6.30 | $4.19 | -33.5% |
*Excludes dividends.
**Split adjusted price.
To see some of MicroCap Gems' past and present winners please click here.
The Holding Period Return for the MicroCap Gems portfolio year to date (12/31/2008 - 5/15/2009) is 13.29%.***
The Holding Period Return for the MicroCap Gems portfolio since inception (5/5/2005 - 5/15/2009) is -25.69%.***
The Russell Microcap™ Growth Index year to date return (12/31/2008 - 5/15/2009) is 5.16%.
The Russell Microcap™ Growth Index cumulative return for the period 5/5/2005 - 5/15/2009 is -26.12%.
***The portfolio is assumed to be equal weighted and is re-balanced every time there is an addition or deletion. Any dividends paid are incorporated into the holding period return. Data presented reflects past performance, which is no guarantee of future results. Due to market volatility, current performance may be higher or lower than the performance shown. Investors may incur a loss despite previous gains. Results will vary with economic and market conditions.
(NASDAQ: GSIT) $3.308
Currently
However, readers should be cautioned of possible liquidity issues with the hot stocks for 2010. There are 26.833 million shares outstanding and the float is approximately 15.64 million. Additionally, volume averages only approximately 43,200 shares per day. Keeping this in mind, when trading such thinly traded 2010 hot stocks, we strongly recommend the use of limit orders and warn readers to expect added volatility.
Furthermore, readers should be aware that one customer accounts for a large percent of the Company's revenues. The loss of business from this or any one of its current customers could have a material adverse effect on GSI.
Over each of the past
For more information on GSI Technology Inc., please visit the Company web site at
(NASDAQ: SORL) $3.00
The Chinese truck and automotive air brake valves and hydraulic brake valves manufacturer and distributor announced financial results for its first quarter ended March 31,2009.
The Company announced that its revenues for the first quarter decreased 34% year over year to $20.243 million from $30.658 for 2008. Net income attributable to stockholders for the quarter fell to
Additionally, SORL reported that gross margin for the quarter fell to 27.2% from 28.2% for the comparable quarter of 2008. The decline was a result of the lower sales.
Currently, from a technical analysis view point, the 2010 hot stocks market appears as if it may be attempting to build support just below the $2.00 area. Therefore, should we be correct in our analysis and should this possible support area continue to hold, levels near this possible support area may offer long term investors an attractive entry opportunity.
We maintain our optimism about this Company's sales expansion and our belief that the international market continues to hold substantial potential. We continue to feel SORL's export marketing and sales commitment will continue to pay off and that the international market alone could lead to tremendous revenue growth.
However, readers should be cautioned of possible liquidity issues with the hot stocks 2010. There are 18.279 million shares outstanding and the float is approximately 6.92 million. Additionally, volume averages only approximately 33,400 shares per day. Keeping this in mind, when trading such thinly traded 2010 hot stocks, we strongly recommend the use of limit orders and warn readers to expect added volatility.
Furthermore, in addition to the normal risks associated with micro-cap companies, SORL has the added risk of potential changes in Chinese regulations and economy. Also, readers should be advised that a small amount of customers account for a large percent of the Company's revenues.
On Friday, May 15, 2009, the Russell Microcap™ Growth Index closed at 610.37. The index ended the week with the best performance of the four indexes for the three periods covered. The Russell Microcap™ Growth Index was up 7.79% over the past month and up 5.16% year to date. The Microcap™ Growth index was down 34.31% over the past twelve months.
The Russell 2000® was up 5.12% over the past month and down 4.11% year to date. The index was down 34.88% over the past twelve months.
The S&P 500 ended the week with the worst performance of the four indexes for its past month and past twelve month periods. The S&P 500 was down 1.14% over the past month and down 2.26% year to date. The index was down 37.98% over the past twelve months.
The Dow Jones ended the week with the worst performance of the four indexes for its year to date period. The Dow was down 0.75% over the past month and down 5.79% year to date. The index was down 36.36% over the past twelve months.
From a technical analysis point of view of the two major indexes, the S&P 500 may see some support around the 650 area and some resistance just above the 900 area. The Dow may see support coming in just below the 6,500 level while resistance may be expected just above the 9,000 area.
Scam Watch
"Lending Scams"
The Federal Trade Commission is warning consumers to be aware of lending fraud in the form of advance fee scams.
In this scam the fruadster guarantees an unsecured loan regardless of your credit history.
The advance fee in this scam is an amount that you must pay in order to receive the loan.
Some of the recent scams claim that the loan requires a deposit or that the victims credit is so bad that a few payments are needed in advance. Other forms of this scam ask for an insurance fee or collateral for the loan amount.
There are a number of measures investors can take to help protect themselves from these types of scams.
Remember that legitimate lenders will not normally ask for up front fees when you are applying for a loan.
Also, legitimate lenders will give you a full rundown and written details on the total cost of the loan. Many lending scams will refuse to give you the loan details in writing.
Additionally, many of the lending scams will use company names that are similar to well known reputable institutions in hopes of confusing the victim. Consumers should check out unfamiliar companies with your local consumer protection agency.
Finally, Individuals can seek help from a consumer credit counseling agency if you are having financial problems and have no access to credit or savings.
Mission
We know that micro-cap hot stocks for 2010 can be risky but we believe that large profit potential exists in some of those same micro-cap companies.
The MicroCap Gems Newsletter attempts to find tremendous growth opportunities in the micro-cap market. We look for companies showing unusual promise and what we perceive as a favorable risk to reward ratio by using meticulous analysis of the company and its competitors. We do this by reading and evaluating all of the research reports written about micro-cap hot stocks for 2010, contacting the companies, customers and competitors.
Most of the research written about micro-cap hot stocks for 2010 is termed "issuer paid research" since the companies themselves pay the research firm to have the report written.
MicroCap Gems is not an issuer paid research provider and to preserve our objective evaluations MicroCap Gems and its employees do not accept money, stock, services, or in-kind advertising in exchange for coverage of particular companies, securities or markets nor do any MicroCap Gem employees trade in any of the companies covered.
We believe that issuer paid research holds much value as long as you can filter out those reports making noise from the companies with true promise.
When we find a real 'gem' that merits your consideration we will profile the company in the MicroCap Gems newsletter. As many of these Gems are long-term investments, once we profile a company we will keep you abreast of on going developments as its investment story unfolds. As we do our due diligence we will also uncover and alert you to scams and pump/dump operations, which will help you avoid the land mines in the micro-cap world.
Editor Bio
The editor, Steven J. Anderson, has over 16 years experience in the investment and trading arena. He graduated from West Virginia University in 1992 with a BSBA in Finance/Investments and Securities. While in college, his stock market passion had him actively analyzing and speculating in small and micro-cap hot stocks for 2010 by the time he started his junior year.
After college, Steve began trading commodity options and Dow futures as a member of the Chicago Board of Trade. However, his infatuation with smaller hot stocks soon had him starting up his own small cap investment newsletter. In 1996 he began writing the Anderson Small Cap Report that was an equities newsletter to investors focusing on small and micro capitalized stocks. Commentary from that newsletter was featured on many web sites and investment publications.
In 2004 Steve gave up trading to take a job as an Equity Analyst and ended the Anderson Small Cap Report.
Once again he found himself longing for the opportunity and excitement only found in the micro-cap stock arena. So in 2005 the MicroCap Gems newsletter was born.
Steve still believes that one of the most enjoyable aspects of writing his newsletter is his being permitted to help others benefit through his knowledge and experience. His infatuation with the markets and his desire to help others learn drives him to speak annually at the West Virginia University MBA Executive Speaker Series. At these seminars Steve speaks to students and industry professionals about his insight and involvement within the intriguing world of trading and investing.
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