Tuesday, January 7, 2014

Textura (NYSE: TXTR): Citron Research Goes Deeper in Exposing the Dirty Dealings of Textura CEO Patrick Allin

The title of the post (see above) is the title of Citron Research’s “second report” on Textura.  Like the first report Citron issued, Citron’s second report is a “must read”.
To refresh your memory, I put up a post on the blog after I read Citron Research’s “first report” on Textura; here’s the link to that post:
Going further, here’s the lead commentary in Citron’s second report:
 - “There is NOTHING an analyst can say here except “Mea Culpa.””
 - “Textura CEO Patrick Allin’s bio is Highly Material to All Potential and Actual Textura Investors”
 - “IPO Investment Bank Analysts are Pro-Actively Complicit”
 - “Company Expenses are Beyond Analysts Worst Nightmare”
 - “Profitability is Mission Impossible”
 - “Citron Reaffirms Generous $4 Target”
Here’s a link to the full second report that Citron published:

Blog Publisher’s comments:

I'm sure you've heard the expression, ‘If something sounds too good to be true, it probably is.’ Well, in the investment world, I say, ‘If something sounds too good to be true, it definitely is.’
[from the 1997 Washington Times 3 June B7]

So far, at least three different analysts have reacted to Citron’s first report by saying that Citron’s allegations are baseless.  They’ve reiterated their “outperform/buy” ratings on TXTR and have set forth (what I think are) lofty price targets for TXTR stock.  The latest analyst to say that is Barrington Research – see note at the end of today’s blog post for what, exactly, Barrington said.)

Note that TXTR currently has approximately 24.87 million shares outstanding, and that, if TXTR stock gets to $55.00 per share, TXTR’s market cap will be in the neighborhood of $1.368 Bil.  That’s correct, you read that correctly, $1.368 BILLION.  After reading the note attributed to Barrington, I found myself wondering, “is Barrington based on Colorado, and, if so, they must have found some really good stuff!”

At some point this year, it’s likely that the stock market will go into a correction period, i.e., fall down a bit (or maybe even more than just a bit.)  If that does happen, I do believe that it will affect, quite adversely, stocks of tech companies that are currently, stock-price wise, flying above the sky, especially those companies that have yet to show profits or even that they can earn profits.  Currently, TXTR is not profitable (in it’s last full fiscal year, it’s losses were greater than its sale revenues), and TXTR has never earned a profit.  So, when the overall market corrects this year, is it not likely, at least fairly likely, that TXTR’s stock will get crushed?  Well, time will tell.

Early last year, TXTR purchased PlanSwift.  PlanSwift’s sales helped TXTR show growth.  More recently, TXTR acquired Latista.  I did not see anything published that indicated how much revenue TXTR picked up by buying Latista: all I saw published was a note that said that TXTR paid $35 mil for Latista.  Is TXTR on a path to buy revenue growth by buying, and folding in, other tech companies?  Without acquired revenues, is TXTR’s organic growth healthy, vibrant and on a rampant surge to the upside?  Based on what I’ve read, so far, in TXTR’s financial-results-reports, I haven’t found any evidence to support that TXTR’s organic revenues are on a rampant surge to the upside.  I have seen TXTR press releases that talk about TXTR’s upside, but, to me, those press releases appear to contain a lot of fluff.

And, having said that, I’m now going to repeat the first paragraph:

I'm sure you've heard the expression, ‘If something sounds too good to be true, it probably is.’ Well, in the investment world, I say, ‘If something sounds too good to be true, it definitely is.’
[from the 1997 Washington Times 3 June B7]

Until I come across information that would cause me to think otherwise, you can, for now, count me firmly in Citron Research’s camp.  If TXTR isn’t able to buy its way out of red ink, I don’t see where TXTR is going to be profitable in 2014 or 2015 or 2016.  Prove me wrong!
For the record, it’s 3:09 pm and TXTR stock is now trading at $28.33, off 11.47% for the day.  TXTR traded, in 2013, as high as $47.25.
Okay, here’s the note that I mentioned earlier in this post:

Textura Corp (TXTR) Added to Barrington Research's Best Ideas List

January 6, 2014 3:30 PM EST, from StreetInsider.com

Barrington Research maintained an Outperform rating on Textura Corp (NYSE: TXTR) with a price target of $55.00. The stock was also added to the firm's Best Ideas List.

A rogue short report published (by Citron Research) the day after Christmas caused a 25% sell off in Textura’s stock.

“While the report created an attractive buying opportunity, we view all of the issues mentioned as baseless," said analyst Jeff Houston.”

"The company's disruptive technology is revolutionizing and modernizing the commercial construction industry, which is large and underpenetrated. Besides first mover advantage, patent protection, pricing power, and opportunities to crosssell and expand globally, we like that subcontractors generate most (75%) of CPM revenue and are required by Textura's GC clients to use the solution. Also, the recovering construction industry presents a tailwind. Despite execution risk, our forecast for a significant profitability ramp and continued 50% organic growth in 2015 justifies a significant valuation premium," he added.

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