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GOCH Lands Sam's Club(3)

GOCH Lands Sam's Club(3)



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Published by: Matt on Jul 24, 2008
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Geeks on Call Holdings, Inc.
Geeks on Call Lands Sam's Club - We are ExpectingRevenues to Double in Fiscal 2009 – Raising our Six-MonthPrice Target to $3.00
Geeks on Call today announced it will begin offering outsourced IT services out of Sam's Club locations. The services, which we believe are modeled after Best Buy'shighly successful Geek Squad business will initially target 20 Sam's Club locations. Inour opinion, this is a company making event, on which investors should capitalize bypurchasing these shares. As a result of gaining this contract, we are raising our six-month Price target from $2.00 to $3.00.
We view this trial as only the beginning of a much more extensive rollout of services,which we believe, could eventually encompass all Sam's Club locations.
As computer and consumer electronic technologies become increasingly complexbusinesses and consumers are increasingly turning to outsourced IT services. Thismarket is growing rapidly and currently valued in excessive of $8 billion for the USalone. It is estimated the market is underserved by an additional $11 billion due to alimited selection of reliable vendors. We believe GOCH is well prepared to target this$19 billion market opportunity.
Over the coming months we are expecting the company to announce an additionalsignificant expansion in operations due to the enrollment of several nationalfranchisors into a newly created Endorsed Vendor Program positioning Geeks On Callas the preferred provider of IT services to the franchise community. We believe theseevents will be additive to our revenue model and will significantly accelerate revenuegrowth at the company.
With a market capitalization of only approximately $17.5 million we view thecompany as meaningfully undervalued relative to the significant market opportunityand thus urge small-cap investors to seriously consider purchase of these shares.
Revenue ForecastConservative CaseEPS FY2008 FY2009
Q1 $1.6A $2.5EQ2 $1.4A $2.9EQ3 $1.3E $3.6EQ4 $1.7E $4.0EYear-End $6.0E $13.0EPrice/Sales 3X 1.3X
Revenue ForecastAggressive CaseEPS FY2008 FY2009
Q1 $1.6A $2.8EQ2 $1.4A $3.5EQ3 $1.3E $4.1EQ4 $1.8E $4.3EYear-End $6.1E $14.7EPrice/Sales 3X 1.1X
Market Data
Market Cap (MM) $17.5Shares Outstanding (MM) 14Float n/aDividend Yield n/a52-Week Range $1.00-$2.85
Financial Summary
Revenue FY 09E (MM) $13.0 (E)Cash end of Last Quarter (MM) $1.4Total Assets (MM) $3.2Long-Term Debt (MM) noneShareholders Equity (MM) $1.8
Update ReportRating: BUYOTCBB: GOCHCurrent Price $1.006-Month TargetPrice: $3.00
Joseph Noel jnoel@emerginggrow.comEmerging Growth ResearchSan Francisco, California925.922-2560
Analyst Certification
I, Joseph Noel, herebycertify (1) that the viewsexpressed in this researchcompany report accuratelyreflect my personal viewsabout any or all of thesubject securities or issuesreflected in this companyreport, and (2) no part of mycompensation was, is, orwill be directly or indirectlyrelated to specificrecommendations or viewsexpressed in this companyreport.
July 24, 2008
Please see important disclosures, including analyst certification
[This page intentionally left blank]
Emerging Growth Research, LLP
July 2008 3
Executive Summary
Geeks on Call Holdings, Inc. today announced it hasbeen selected by Sam's Club to provide outsourced ITservices out of select Sam's Club locations. Sam's Clubis the membership warehouse subsidiary of Wal-Martstores, Inc. While this a pilot program at this time,which will encompass 20 locations, we believe the planis to eventually roll this program out to all Sam's Clublocations.Shares of Geeks on Call Holdings, Inc. are significantlyundervalued at current levels, even if only 20 Sam'sClub locations are serviced, as we had already beenexpecting a more than doubling of revenue in fiscal2009. Should the program include additional stores,shares of this company are likely to move much higherthan our current $3.00 price target.We view the announcement being made by Geeks onCall Holdings to be a highly significant company eventand urge investors to seriously consider these shareswhile this information, while public, is not wellcirculated within the investment community.Geeks On Call Holdings, Inc. (GOCH.OB) operates asone of the leading nationwide providers of outsourcedInformation Technology (IT) services targeting smalland medium sized businesses and consumers. Thecompany began operations in 2001 and has grown tomore than 260 franchises operating in approximately 30major metropolitan areas in the United States. Whilethe company will continue to expand its franchise-basedoperations, an additional emphasis moving forward willbe on company-owned operations, which offersignificantly higher margin potential.As consumer electronics and computer systems becomeincreasingly complex, many consumers are having adifficult time installing, operating, maintaining, andrepairing products within these categories. Theseconsumers are increasingly turning toward outsourcedservices to meet their needs.The company's services, which all are offered under thebrand names Geeks On Call, 1-800-905-GEEK andCallTheGeeks.com are provided by a dedicated staff of highly trained technicians all of whom hold high levels of ITindustry certifications. Geeks On Call Holdings, Inc.provides considerable support for its franchise operators andhas recently instituted several brand building and advertisingcampaigns, which are designed to drive business to thefranchisees and to the company’s telephone-based supportoperations. We have been very impressed by brand buildingstrategies that have been put in place by management.The market for information technology support servicestargeting the small and medium-size business and consumersectors is highly fragmented, with the two largest players,Best Buy’s Geek Squad and Circuit City's Firedog, capturingapproximately 20% of the $8 billion annual market. It isgenerally believed by several industry analysts that themarket is currently underserved by an additional $11 billion.It is our belief that Geeks On Call has an excellentopportunity to also align its operations with a nationwideretailer. While we believe there are risks associated withinvesting in the Geeks On Call story, which include strongcompetition, an emphasis in the business model towardcompany-owned operations, and the likelihood that additionalcapital will be needed to execute the business plan, webelieve these are acceptable for most small-cap orientedinvestors when the upside potential is considered.Over the next fiscal year we are expecting a strongacceleration in revenue growth from this company, driven bythe expanding company owned operations and agreementswith nationwide operations, such as Long and Foster RealEstate, which recently endorsed Geeks On Call as aparticipant in their Home Connections Program wherein theywill offer outsourced IT services to their offices andrespective agents. We believe the company will be especially

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