Surge Holdings, Inc. (“Surge”) (SURG), a holding company with diverse business operations in FinTech, Telecommunications and Media, has once again shown the small-cap world that it might be making the transition to a mid-cap stock. Most recently, the company released preliminary revenue figures for the first quarter of 2020, which shows they increased 307% to $15.8 million, versus $3.9 million for the same period last year. While those percentage increases are substantial, the actual revenues numbers are beginning to paint a vastly different picture. We are beginning to see one of the very rare occasions where a over-the-counter small cap company has followed through with its revenue plans, and is actually substantially beating their own projections. Whats more, these numbers are already well within some of the main mid-cap players (even some large cap players) within the same sub-sector. From this, it’s easy to see that Brian Cox has created a company that is able to achieve what the OTC market place was originally designed for; a stepping stone to a national stock exchange.
Looking further, we can now see that the company has surpassed a $60 million annualized revenue run rate. Whats even more amazing is while the majority of companies in the mid-cap world took major hits to their bottom line during 2020 due to the COVID-19 Pandemic, Surge Holdings has yet to skip a beat, and is continuing to show quarter over quarter increases in revenues. This in it self poses a very unique opportunity for investors, as Surge continues to make its way out of the OTC, evaluation begins to play a bigger role. Historically in to the OTC, evaluation does not mean a great deal, as a large majority of investment decisions are based on dramatic chart opportunities, hype, and quick trading opportunities. In the past, when a OTC company begins to leave this type of trading behavior and beings to appeal to investors, the evaluation of the company plays the biggest role yet.
With an increase to $84.3M top line revenue, even a 2x valuation would indicate $1.63 per share. Currently, the companies price per share sits at only $0.31 per share. If the revenues continue, the company will surely break away from the small-cap world, and the 2x valuation will be significantly undervalued. This is not based on a hypothetical anymore, as the revenues numbers are consistent and are in-line with the companies recent growth. This lack of share price movement due to increased revenues is a by-product of the “penny stock” mentality among traders. It is rare that we find companies with a 400% increase in revenue and no corresponding increase in share price.
Looking at the long-term chart patterns, it’s clear as all SMA’s have converged and maintained their convergence for 3 weeks now, a return the the $1.00 price test is in progress. This time however, the company has the revenues to break through on way to its true evaluation.
The company also launched a new phone platform, under the Loco Rabbit Brand “Grab-n-Go” phones. CEO Brian Cox has stated in developing Loco Rabbit product he looked at most popular brands being sold in ECS Network stores. This allowed the company to create a better product at a lower price to attack that market share, along with the fact that they have a built in distribution channel through the Surge marketplace and ECS Network. This is also a great lead product to help recruit other retail locations looking for an easy wireless product to sell to their customers. With this new venture, which targets 100 million customers already using prepaid devices, we can begin to see how large the companies infrastructure truly is, one that is more than capable of supporting a mid-cap status within 2020. With shares trading below the levels established in September of 2019 and the dramatic increase in revenues it seems only a matter of time for the eventual move back to the 2019 highs and possible correct to a 2x top line revenue valuation.