Friday fun with KongZhong Corp

Submitted by Eric Cheshier on Fri, 04/11/2008 - 15:26

Tags:

Financial News

The Motley Fool called KongZhong Corporation (ADR) (Public, NASDAQ:KONG) the best small cap stock for 2007. Swing and a miss there. Over the last 52 weeks the stock has ranged from $9 to $3.45, so there's only one answer with how to predict this stock. You guessed it, the Flux Capacitor.

KONG shares are now at $4.47 and since October 07 investors got hit hard for a 41% drop in their investment.

It's Friday so let's have some fun first. I'm guessing KongZhong's future chart is going to look like its previous history (refer to chart below using the Flux Capacitor).

FLUX FORECAST

It's going to go back down to about $4.05 - $4.20 before spiking back up to $5.50 again, then down to $5.25 and back up to $5.75, before it crashes back down to $3.75 - $4 again.

So to play this one right, I would put a limit order in for around $4.25 and sell around $5.25, that's a 25% gain.

Back to the present, in March KongZhong posted a Q4 07 drop in profit and the stock fell from over $6 a share to current levels today (in the $4.50 range).

Financials

(In millions of USD)

Income Statement	Quarterly (Dec '07)	Annual (2007)	Annual (2006)
Total Revenue	19.81	74.02	106.77
Gross Profit	9.59	37.52	59.10
Operating Income	-0.39	-0.33	21.22
Net Income	0.69	2.83	24.69
Balance Sheet
Total Current Assets	141.83	141.83	145.35
Total Assets	181.89	181.89	166.74
Total Current Liabilities	11.29	11.29	10.82
Total Liabilities	11.42	11.42	10.96
Total Equity	170.48	170.48	155.78

American investors have lost their love for throwing money at any stock with 'China' in the name. There's mixed reviews on investing in China these days, but the majority is saying, it's time to sell.

Which brings me to the Flux Capacitor chart, using common sense KONG shares are going to keep falling.

On March 3rd, Chinese wireless media and service company KongZhong Corp. said revenue in Q1 08 will be between $20 million and $21 million.

The first quarter of last year brought revenue of $23.7 million.

KongZhong will continue to expand its wireless Internet business, and invest a major portion of the operating revenue generated from its service segment to developing its wireless Internet business. They have a target for mobile advertising revenues in 2008 to be between $2 million to $3 million.

Things are bad for everyone these days, but the long term play and the future bounce of KONG shares is why I'm writing this article.

Let the market run its course on KongZhong, investors will get the chance to benefit from their year long downfall. Maybe in 2009, Fool.com will pick it again for best small cap, then again, maybe Marty will go back in time and kiss him Mom.

Happy Friday Masters.

Disclaimer: The Author has no positions in KONG.

mastery