LCRD

[Tirebldr]

LaserCard Corp. (LCRD) shares gained 11% to $9 after the company said it has received a $15 million order for optical memory cards for use in Italy's two national identification programs. The company expects shipments to represent up to $5 million a year in revenue once the program is fully implemented. The company anticipates that full implementation of the program will result in card shipments of $40 million a year.

[pompano]

I believe this is a breakaway gap.  I also expect many more countries will be going with this format.

[ramlau]

An insider just bought 9k today:

http://www.secform4.com/insider/viewform4.php?cik=30140&dir=000003014005000010&form=edgar.xml

Shorts seem to be losing in this one:

[pompano]

I saw this as a breakaway gap and bought the other day.  IMO it will run to 11.00 next week we will see. 

[eliteG]

The chart and the insider buys..looks like a great pick to me ramlau  thx (applaud)

[ScottishTrader]

pompano,

boy would that have been a breakaway gap to buy, with an eventual top at 22.75!!!  well I guess you can't win (or spot) em all!!!  Anyway, a friend called me the other day and said a broker had acalled him recommending LCRD, and he asked me to take a look, so I thought I would post my analysis here.  Looks interesting, but maybe not quite yet ready for an entry.  Enjoy!!


Got your message about brokers calling you about Lasercard (LCRD) and I had a little look at i for you.  Here's my analysis on the situation.

Profile:

LaserCard Corporation, a leader in secure ID solutions, manufactures and markets LaserCard® optical memory cards with Optical IDLock(TM), chip-ready OpticalSmart(TM) cards and other advanced-technology secure identification cards. The Company has sold over 35 million secure ID cards to meet the demanding requirements for border security, immigration and national identification in countries around the world, including the United States, Canada, and Italy. In addition, the Company manufactures optical card read/write drives and develops optical card system software, card-related ID subsystems and peripherals. The Company operates a wholly owned German subsidiary, Challenge Card Design Plastikkarten GmbH, which manufactures advanced-technology cards and also markets cards, system solutions, and card personalization printers under the Cards & More brand


Financials:

On the plus side, LCRD is a small cap stock (market cap is $140M) with reasonable average trading volume (about 200k shares/day, i.e. about $2.4M/day in share value).  However a brief look at the fundamentals doesn't paint a fantastic picture.  While revenues have been increasing since 2004 (almost 70% in 05 and then 40% in 06) and earnings per share has also reflected this, they have only just achieved breakeven on a net profit basis last year.  In addition, looking at the last 4 quarters, revenue and earnings were strong in the first half of the year, but dropped dramatically over the last 2 quarters  (Q1 $14M, Q2 $10M, Q3 $6.3M, Q4 $6.2M), and as a result they have racked up corresponding net losses over the last 2 quarters of about .25c/share.  Analysts are expecting this to continue with projections of revenues in the $5-7M range for the coming 2 quarters, and an overall loss of .65c/share for the current year.  However, there could be some drivers to growth in the second half of 2007, and they are projecting a substantial increase in revenues again in 07/08. 

While the total number of share outstanding as stayed pretty consistent over the last few years, another negative is that they just filed a shelf registration statement, which basically allows thm to issue up to 3.5 million additional shares of LCRD stock to generate cash as and when required.  This is fairly standard in small cap stocks who need cash to drive growth, but considering they have 11.85M shares outstanding, we are talking about 30% dilution here (i.e. if they issue all the possible outstanding warrants in this shelf, and the company's value remained the same, your stock would be worth 30% less than it is right now).  However, note that this doesn't mean they will  it just means they can.  They balance sheet looks fairly strong at the moment, but if they need to grow rapidly, they could do this through dilution.

News/drivers:

I've just had a cursory look at the recent news and earnings reports, and it seems like the reason for the loss in revenue over the last couple quarters has been due to a lack of new orders from the Italian Government who have been piloting an optical national ID card scheme using LCRD's technology and cards.  I think there was concern that this project would get mothballed, however, recent comments from the Italian government suggest that it wants to continue with this initiative, which should add significant revenue to LCRD in the coming year or so.  Whether this is currently priced into the stock is unclear to me, but announcement of new contracts with the italian government should get his stock moving.  They have some other projects on the burn and whether the company manages to secure more deals with different government will be key to its future prospects  (they currently have orders with India and some middle-eastern countires as weel, but any deals with the U.S. government don't appear to have merit for now).

Technicals/chart picture:

This is what I mainly base my trades upon, and with LCRD the picture seems quite clear.  The 1 year daily chart shows that LCRD has been pretty much range-bound for the last several months, trading in a range between $9.50 and $14.  There is significant upside resistance at $14, and any break of this level I  anticipate would result in a substantial run for this stock.  The recent news about the Italian government's continuation of its ID card program started a heavy rally in February from the lows right up to this $14 resistance level, but it was unable to break out, and despite a second recent re-test, it has been pulling back sharply again this week.  Major support is at $9.50, but I  also see secondary support at $11.50 and $10.60. The 50 day moving average (blue line) is about to cross over the 200MA (red line), which is generally considered to be bullish, but while the 50MA has a positive trend, it is pretty weak right now, which doesn't give us much info about the short term trend, and we know the medium term trend is sideways, for now.  As for making a trade in LCRD, the best way to do this, with the least risk would be to buy a break of $14 resistance, as a breka of this level would be significant, and a move back into the trading range would be considered a failed breakout and a sell signal).  I know you tend to hold longer term, so that would be a clear signal that the stock has broken out of its base and wants to go higher.  However, as the stock currently trades at 11.80 (as of friday's close), that is a premium of 18% from its current level. Another option would be to attempt to buy at support.  If you could get an entry below $10, that would represent a very good risk:reward setup, as you could sell a break of 9.50 support for a maximum risk of around 5%.  The gain, even on a move back up to $14 resistance would be 40+%, so very nice.  However, it might not make it all the way down to $10 though, so you could also attempt to scale into a position.  I would aim to buy a bit close to 11.50-60, and if it breaks that level, add some at 10.60.  Taking this strategy, you would be looking to add a quarter of your final total position at each of these levels, and save the remaining half for a break of $14.  this would mean you would end up having a net position of at 12.50, while limiting your downside risk to about 14% on half a position (i.e. if it breaks below 9.50, you have only purchsed half a position, which is averaged in at about $11, and the downside risk from here is about 14%).

The 3 year weekly chart gives a better picture of potential longer term returns.  If it breaks out above $14, I think the stock should easily move up to at least the last level of significant resistance, at 16.60-17.25.  This would represent a gain of 23% from the breakout level, and probably a good place to take some off the table.  However, it is also entirely possible if the Italian order is significant and their technology gains traction elsewhere for the stock to test its highs in early 2006, when it was trading as high as 22.75.  This would represent a total gain of 62% from the breakout point.  Not bad.  Analysts seem to expect that we will see stronger revenues later in 07 and into 08, and it sounds like if the italian government go ahead with this project (which it sounds like they are committed to) then because they already have a lot of LCRDs technology, they will definitlely go with them.  I'm not saying its a shoe-in, but it does seem likely.


So anyway, I don't really think it is a 100% crazy buy right now, especially at this level, as the short term trend has been steeply down and the downside risk from this level is still significant (~20%).  If you are looking for a long term trade on this one, easily the best way to do it is to buy the breakout, and just keep an eye out for it (or tell your broker to do so).  If you want, I'll keep an eye on it for you, and if I see anything interesting develop, I'll let you know.

[ScottishTrader]

The more I look at LCRD, the more I think this one is ready to kick into gear.  So I've taken a position here at $13.  They recently announced a new contract with the Department of homeland security for Green Cards that should add about $10M in revenues over the next year, and approx. $3M per quarter over the next 2 quarters .  I anticipate (given the Italian Government have indicated they want to go ahead with the ID program) that we will hear about a contract from the Italian government shortly. 

http://biz.yahoo.com/prnews/070402/aqm009.html?.v=10

Technically, LCRD made a nice bounce off support at 11.75 (shoulda been a buyer right there...), and I think it looks poised to test $14 again.  We have 3 consectutive "higher lows" in the last 2 months, which suggests buyers are getting more aggressive.  Short term resistance looks to come in around 13.35, and I would like to see it hold above $13 now, but with a small float and low volume, there could be some trading volatility here, so I will sell a move below $12.40 (no stop though).  Major resistance is at $13.85-$14.  We also got a golden cross in a couple of sessions ago, and the 50MA now has a nice upward trend.  Basically everything looks like it is coming into line here...

[eatrader]

News should be out on the Italy contract shortly.  Should be enough to cause a short squeeze and move the stock up towards $20.

[ScottishTrader]

LCRD made another higher low this week, testing support in the 12.30 area.  I think the chart continues to look like it wants to break higher, although it has been struggling a bit with resistance at $13-13.05.  Above that there also looks to be resistance at 13.30-40.  Volume is pretty low, but thats ok for now, the stock is obviously waiting for news to get it going.  I added to my position (only had half a position before) at 12.60.  Maintaining a stop below 12.30 support.