• Besides the stock price that is.  Since announcing its earnings after market close on May 20, Covisint’s stock is up almost 40%.  (Meaning the stock has increased from about $2.00 to about $2.80;-))Covisint Stock Price

 

 

 

 

 

 

In that earnings call, the company announced: Revenues for the year ended March were down 9%.  This was driven largely by a decline in services revenue.  Subscription and support revenues were only down 1%.

  • The net loss for the year was $38.5 million versus $36.5 million in the prior year.
  • Covisint also provided guidance for FY2016 of subscription revenue growth of 5-10%, with total revenue declining further as Covisint strategically shifts out of services revenue.  Covisint labels 2016: A Year of Execution.  2015 was the Year of Transition.  (I like this idea of naming each year, it has worked for the Chinese.)

Normally, this is not the stuff of which stock rallies are made, and yet a rally is what we have–on good volume.

There are several possible reasons for the rally in COVS shares:

  • Traders read my blog post of May 14 suggesting Covisint, among others, as a go-private candidate.  (Highly unlikely.) (I still think Covisint would make a nice, private combination with Exostar, Liaison, Elemica and others.)
  • Investors figure all the bad news on Covisint is now out.  Also the stock has declined from $7 a year ago. (This explanation seems more likely.)
  • Investors like the management team’s story (see investor presentation) of:
    • New sales and marketing team
    • More focus on Internet of Things, identity management
    • New services partners to take over that work
    • New partnerships with Cisco and Tech Mahindra
    • New office on West Coast
    • New emphasis on cost containment (took out $20 million in run rate costs)

If the company did not have any debt and was not projecting to burn $12-$15 million in cash next year, it would be an interesting option on the whole IoT and connected car space.  It may still be.

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