Rocket Fuel (NASDAQ:FUEL)

CAPS Rating: 3 out of 5

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Member Avatar superstar (99.71) Submitted: 8/17/2014 2:41:08 PM : Outperform Start Price: $18.05 FUEL Score: -12.28

Well, I'd be surprised if FUEL continued to fall at this level. The MM's have had a heyday bringing down the share price, and profiting handsomely from it. FUEL is the type of tech company that is largely valued based on sentiment. Its going to take at least another two years to see if its strategy of raising the top line numbers eventually leads to profitability. So far, its revenue numbers actually look pretty good. Its business is in a hot niche, and I suspect at some point sentiment turns positive on its business and that shares jump 'big' to the upside from this level. Obviously a risky investment, but I like the risk/reward and will offer a long-term green thumb to FUEL.

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Member Avatar TSIF (99.96) Submitted: 8/7/2014 8:18:58 PM : Outperform Start Price: $17.19 FUEL Score: -7.72

Noted Rocket Fuel in a pitch/blog in May when the bottom dropped off the Rocket. Played it back up for 24 points, but decided it was getting a bit orbital considering the shadows still being cast on it by the moon. A second shoe almost always drops under these conditions of a warn, and then a quarterly with more downside guidance on an unprofitable stock.

Not sure where the bottom is here. From the standpoint of guidance, this is dead money for several quarters at least. Really not worth near my CAPS entry. But this is a tech company, which tend to rebound, and are typically valued forward...the question is where's forward. I noted in my last pitch that falling knives can last 2-3 days, so it appears I was early on my entry. I also noted that Crammer indicated it was not done dropping in May...I rarely give him Kudo's...if you throw enough crap, some of it is bound to stick, but he seemed to have this one's tail number.

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Repeating my old pitch, before it got frothy...
Rocket Fuel is an ecommerce. (Note "e" and "cloud" are among the darlings getting tossed). Especially IPO with less than a year's run time. It attempts to use artificial Intelligence to determine the "best" ads that will tempt us to click into them. With the click being the payout for the ad, it's critical that consumers get targeted with temptation, not something they can easily ignore, or worse be repulsed by. Rocket Fuel IPO'd in Sept 2013 on a small issue for around $60 per share. There are no winners who bought this stock at any point and held it. This "use" to help form some resistance as booking losses is not something we are prone to do, except to balance end of year gains.

"artificial-intelligence digital advertising solutions" is not sexy and not easy to explain. As such measuring the market is difficult. The markets clearly though Rocket Fuel's potential was going to allow it to grow, and revenue wise it has grown nicely. At this stage, however, all growth and more go back into scaling out. During this period you continue to post losses and one can look at the top line growing or the bottom line showing losses. Do you forward value, how much??

Rocket Fuel has DOUBLED Revenue YoY. AS I'm fond of saying if you double a penny, you don't get bragging rights, but on paper it can look good. In this case we are talking 2011, $44M, 2012, $106M, 2013 $240M, not pennies.

So Q1, '14 revenue increase was only 95%, topping estimates....look out! Unfortunately, they guided down next quarter...slowing growth? 65% QoQ. Yes, but it's a tough tech climate all around lately. Look at the Big Boys. The down guide, however if for Q2 only, and includes more growth. They expect to meet guidance for the year. R&D spending up 200% indicates Rocket Fuel is adding new features and improving it's platform. Gross margins are improving and it's trying to grow its moat.

Either the market does not believe them, or they had it priced for "more growth" than guidance suggested.

Where is bottom when the knife falls?? I don't know? Where is sentiment going later this year, (I suspect down, but...) I don't know.

I suspect based on analyst down grades, that Rocket Fuel is in a prove it mode for the next few quarters. Where it should have been when it IPO'd. I like equities when everyone else is underwater who held. My psychologists who check up on me from time to time suggest its because we all like to feel superior if it goes up because we were "smarter" on our entry than the "other guy"....or if it goes down more we can blend in with the crowd and be less deep underwater, so still "smarter", just not genius level. It's not an investment thesis, and I don't recommend letting it become a pattern. Don't be the one who says it's $20 now, it was $75, I've got a slam dunk. It doesn't work that way in the market. Either the equity was inflated or its metrics changed. The market could be under sizing it now or those who don't like losses could capitulate and continue selling into a right sizing.

I think Rocket Fuel is worth the benefit of the doubt. If management delivers in Q3, Q4, it stands a good chance of getting back on the good grace of the market. Float is small, if institutions sign on, it could see enough demand to get into stronger hands. Looks like the rocket is in orbit is still in orbit, but needs to refuel. $218M in cash will support the growth cycle. A P/S of about 1.7 doesn't need a lot of support. A market cap of $800M is not so lofty.

Long term play (6-9M reevaluate).

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Member Avatar udyy (< 20) Submitted: 5/9/2014 4:39:27 AM : Outperform Start Price: $19.77 FUEL Score: -23.14

This disruptive technology stock address the online advertising market. It has competition but the segment shows health growth of 60-70% p.a. Currently when its price was slaughtered both by the market and internals the profit/loss ration seems favorable

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Member Avatar NovaTodd (< 20) Submitted: 5/7/2014 1:18:12 PM : Outperform Start Price: $27.80 FUEL Score: -48.22

Looking for the baby in the bathwater from the recent momo meltdown. Valuation not nearly as stretched here as it was in other (once) popular names, and the revenue growth has been off the charts. No real money.

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