Wednesday, January 2, 2008

Is the Worst over at Syntax-Brillian?

I think so.

Syntax-Brillian (BRLC) is still over 60% off of its all-time highs reached one year ago. 2007 was certainly an awful year for any stubborn BRLC long. (Thankfully, as I've noted before, I was on the sidelines for most of the decline.)

I jumped back in with long stock and call options when the stock was around $2.75 just about one week ago. I figured I'd give BRLC one last chance.

There's a few reasons why I think now is a fine time to buy back in. As I've previously posted, there was some speculation that there could be a buyout or merger that may affect BRLC, whether with Vizio or another company. Those whispers have settled down, but since the stock price is so depressed, it's still an attractive takeover target.

The stock is so cheap. It's current price/sales ratio is just .4 - compare that to the 14 p/s ration of Google. The unbelievable p/s ratio shows that the stock has plenty of room to run. Anything under 1 is dirt-cheap, while a high-growth stock like BRLC can have an acceptable ratio with a low-single-digit figure.

During late 2007, the stock price was probably depressed even further by tax-loss sellers. During December, lots of the negative and sideways price action was due to these chronic sellers.

The price of BRLC shares have started to tick up in the last few sessions. Coming off of a low around $2.50 on December 19th, Syntax shares are up over 20%. Each of the last six sessions have been positive. It's clear that this is BRLC's most significant, long-lasting upward action since it began its final downward slide this fall. Excluding the $1 one-day bounce in October, there had been no serious upward action whatsoever. But now, the stock has strung together a week of gains and just crossed through the 50-day moving average. Based on a history of BRLC, seen below, this may be very significant.

BRLC has clearly had its ups and downs over the years. But one pattern is undeniable; once BRLC breaks through the 50-day moving average (the blue line) after a long drop, it doesn't look back. In both the spring of 2005 and summer of 2006, BRLC lost much of its value, crossed the 50-day, and went on to set a new all-time high. I'm not going to start saying that BRLC will be at $15 in three months, but this does seem to signal the end of the bearish cycles.

All of that is just tecnical, too. It ignores the chance of BRLC blowing away holiday sales statistics or any other positive news. So there's many reasons for BRLC to trek up from this point; cheap valuation, buyout potential, positive earnings potential, the change in charting indicators, and the fact that it's still down so significantly from its high. BRLC had been tossed around (rightly so, at some points, when management failed shareholders) for a long time; now, it's time to turn its act around.

I can see BRLC doubling in 2008. Is it guaranteed? Certainly not. Is it possible? All signs point to yes.

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1 comment:

Felix said...

Hmmm, BRLC is down to $1.6 today... down another 40% since your post a month ago. Maybe now is the bottom...

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