1. IntroductionAussieTrader suggested that I should take a look at BFLY, and I've learned the hard way to pay attention when he makes a call (SKNN is just one example).
2. ProfileFounded in 1998, Bluefly, Inc. (NASDAQ SmallCap:
BFLY) is a leading online retailer of designer brands, fashion trends and superior value. Bluefly is headquartered at 42 West 39th Street in New York City, in the heart of the Fashion District. For more information, please visit
www.bluefly.com.
3. Technical Analysis3.1. All History Chart
BFLY stock has been dead since late 2003. The stock was only able to make temporary spikes in the past, because it wasn't profitable. But probably that's about to change now and perhaps it can make a more sustainable rise.
3.2. Medium Term Chart
This is what we call a bearish trend. But in 2006 the stock was able to build a base and it is above the 50 and 200 days moving averages now.
3.3. Short Term Chart
The short term trend is bullish, after that big white marubozu that was due to this news:
Bluefly Monthly Sales IncreaseThere was some consolidation over the past four days, which didn't damage the positive short term technical picture. And with this news out yesterday (
Bluefly.com Has First Million Dollar Day) I expect the stock to blow out this consolidation phase, breaking through the $1.23 recent intraday high.
4. Fundamental Analysis4.1. Number of Shares Outstanding
You can see there was an enormous increase in the number of shares outstanding in 2006. That was due to a conversion of preferred shares from George Soros' funds and other institutional investors. The current capital structure stands like this:
4.2. Liquidity
BFLY's balance sheet looks strong.
4.3. Revenues
Revenues are growing 28% a year, on average, since 2000. I expect revenues of $75 M for the full year 2006. If this growth rate is maintained for the next 10 years (which I think is entirely possible), revenues in 2016 will be $885 M (but recent news tell me the revenue growth is accelerating, and that would change all this a lot, to the better, of course. But I need to be somewhat conservative).
Apply the current sales multiple of 2 and get a $1.77 B market cap company in 2016, which translates into $13.73 for the stock price. Considering yesterday's close of $1.15, this implies an average annual rise of 28%.
I think that's an attractive long term proposition.
4.4. Net Income
I don't like the fact that the company is still losing money, but, if it were profitable already probably the market cap would be a lot higher. The gross margin is improving rapidly, so perhaps they will turn a profit in 2007, they should:
4.5. Recent News•
Bluefly.com Has First Million Dollar DayBusiness Wire (Wed 8:00am)
•
Bluefly Monthly Sales IncreaseAP (Thu, Dec 7)
•
Fashion Retailer Bluefly Selects ATG CommerceBusiness Wire (Mon, Dec 4)
5. General OverviewI love the business model of selling fashion apparel online. Personally I don't like to go to the stores, shopping. I have no patience at all (of course my wife loves it).
I think the business is getting even more traction, and revenues may very well accelerate from a 28% average annual growth rate to a 35% growth rate or more in the coming years. Gross margin is improving and I guess they will turn in a profit for full fiscal 2007 (maybe a small net income positive for the 4th quarter of 2006, since sales are surging).
Technically the stock is moving higher on a short term basis. I believe the recent run won't stop south of $1.50, at least.
6. Trading PlanBuy BFLY today between $1.15 and $1.20, 6.66% of equity as usual.
