Given the recent market meltdown, it has been like pulling teeth sifting through potential bullish charts, but I found one in the microcap arena with this $165 million stock. It just hit a new 52-week high and is almost 10x above its 52-week low. Does this COOL stock have more upside?
The stock in question is called Majesco Entertainment Company (COOL), and it provides interactive entertainment products primarily in the United States and Europe. It offers video game software and other digital entertainment products. The company publishes video games for interactive entertainment hardware platforms, including Nintendo’s DS, DSi, and Wii; Sony’s PlayStation 2 and PlayStation Portable; Microsoft’s Xbox and Xbox 360; and personal computers and other mobile devices.
On A Roll
Recently, the company bolstered its online gaming portfolio by making several key acquisitions from Quick Hit, Inc., underscoring the commitment to its social games business. Specifically, Majesco acquired certain key operating assets as well as the Quick Hit development team to execute on its social games strategy. I think the stock could get a further boost once the anticipated IPO of Zynga occurs as investors will be looking for peripheral plays on that hot issue.
Despite the recent run, the stock is actually still cheap based on next year’s numbers. Currently, analysts are calling for the company to earn 38 cents per share in 2012, which is way up from the 22 cents that analysts were forecasting just 90 days ago. Based on this figure, the stock is trading at a reasonable 11x earnings.
Of course this stock has plenty of risk involved as does any microcap security. It had negative cash flow last year, and isn’t cheap on a book value basis. I wanted to introduce a small cap that was enjoying good times both fundamentally and technically to cut through the gloom and doom that we are bombarded with daily. So as always, do your own due diligence before buying.
The Chart
I love this chart as it is in a clear uptrend and trading at new highs. There is no overhead resistance, and there is good support at the $4 level. Up volume has consistently been higher than down volume indicating buying pressure. I wouldn’t be surprised to see the stock take a rest and consolidate some gains, but the chart is clear that the trend is higher.
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