PFSW – Initiation of Buy Recommendation

By: ispeculatornew
Date posted: 12.17.2006 (12:00 am) | Write a Comment  (0 Comments)

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PFSW – PFSweb (Nasdaq) (Closing Price on Friday, 12/15/06 – $0.91)

PFSW (PFSweb) is a speculative play. The company has had a few challenging quarters but now is a good time to bet on a turnaround.

PFSW provides outsourcing and supply chain solutions and earlier this year PFSW merged with online retailer ecost. Before the merger PFSweb was profitable and had growing revenues. However, the combined company has had problems since the merger.

Most of these problems have been related to integrating the two companies. This integration process has taken longer than expected and fraudulent credit card activity has also had an impact on results. In PFSW’s last quarterly release though, the CEO stated that the integration was nearly complete and the fraudulent credit card activity was under control. With the integration almost done future results will be better than the last few quarters.

If you follow stocks you now that retailers are cyclical companies and they have their best quarters during the holiday season. This is another reason now is a good time to bet on improved results. Ecost will definitely show improvement in revenues the next time earnings are released.

Recently a fund that owns more than 10% of PFSW has been buying shares. This is a good sign and if they continue to make purchases this will help buoy the share price.

Finally, PFSW is trading below its book value (which according to yahoo finance is 1.18). Therefore, you can currently buy PFSW for less than it’s worth.

I would buy and hold PFSW for a short term gain. If they report good results next quarter I would hold a bit longer and see how things play out.

Disclosure: I currently own shares of PFSW.

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