Small Cap Synacor Inc (SYNC): Blockbuster Potential or Just a Dud? SKYY, IGV & SOCL

Although Small cap Synacor Inc (NASDAQ: SYNC) calls itself the place "where Tech, Hollywood and Madison Avenue meet in the cloud," its not exactly been a blockbuster for investors – meanings its worth taking a closer look at the stock along with the performance of potential benchmarks like the First Trust ISE Cloud Computing Index (NASDAQ: SKYY), iShares North American Tech-Software (NYSEARCA: IGV) and Global X Social Media Index ETF (NASDAQ: SOCL).

What is Synacor Inc?

Small cap Synacor Inc calls itself a "Tech company at the intersection of Hollywood and Madison Avenue" or "where Tech, Hollywood and Madison Avenue meet in the cloud." What that means is that the company's white-label platform enables cable, satellite, telecom and consumer electronics companies to deliver TV Everywhere, digital entertainment, cloud-based services and apps to their end-consumers across multiple devices. Synacor Inc says it's the leading provider of next-gen startpages, homescreens, award-winning TV Everywhere solutions and cloud-based Identity Management (IDM) services across multiple devices for cable, satellite, telecom and consumer electronics companies in the US and abroad.

As for potential performance benchmarks, the First Trust ISE Cloud Computing Index tracks the ISE Cloud Computing Index through 41 holdings; the iShares North American Tech-Software tracks the S&P North American Technology-Software Index through 61 holdings; and the Global X Social Media Index ETF tracks the Solactive Social Media Index through 27 holdings.

What You Need to Know or Be Warned About Synacor Inc?

First a bit of history: Synacor Inc debuted in early 2012 at $5 - sharply below its original plans of debuting at $10 to $12 a share. Nevertheless, it appears that shares quickly got way ahead of themselves thanks to the activities of certain promoters or traders while the company itself has long warned that a growing number of consumers are using mobile devices instead of computers and software applications to access the Internet – hurting its search-and-display advertising (they are developing solutions to address these trends). Hence, shares have largely been hovering around the $2.50 level since early 2013.

In mid May, Synacor Inc reported total first quarter revenue of $25.2 million verses $29.1 million for the same period last year with search and display advertising revenue coming in at $19.9 million verses $24.1 million while subscription-based revenue was $5.3 million verses $5.1 million. The net loss came in at $2.1 million verses net income of $0.0 million and the company ended the first quarter with $33.0 million in cash and cash equivalents verses $40.2 million at the end of the first quarter of 2013.

Synacor Inc also said it averaged 19.7 million unique visitors per month verses 20.3 million in the first quarter of 2013 while search queries fell 27% year-over-year and 2% sequentially to 154 million verses and advertising impressions fell 25% year-over-year and 11% sequentially to 8.6 billion. The CFO commented in the earnings call (which is available on Seeking Alpha here):

We believe the decrease in the search queries and advertising impression was associated with lower activity amongst our consumers related to the increased use of other devices such as tablets and smartphones generally across the consumer base.

In the Q&A, the CFO answered a question regarding the appearance of sequential stability in key metrics by saying:

I think we do have more firm grass and also I think with the rollout of these products we are increasing the strategic relationships that we have -- improving and increasing the strategic relationships that we have with our current customers. And I think we will see some new client launches as well, so I think we do have stability and I think we also have some interesting monetization opportunities on the mobile side and our customers are embracing those mobile products. So I feel very good about where we are at right now.

However and beyond the recent financials, investors should be aware that Synacor Inc has seen a bit of insider selling according to Yahoo! Finance's Insider Transactions page:

Insider Transactions Reported - Last Two Years

DateInsiderSharesTypeTransactionValue*

May 22, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.26 per share.	25,990
Apr 24, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.46 per share.	28,290
Apr 17, 2014	CHAMOUN GEORGEOfficer	10,000	Direct	Option Exercise at $0.20 per share.	2,000
Apr 15, 2014	CHAMOUN GEORGEOfficer	5,000	Direct	Automatic Sale at $2.54 per share.	12,700
Apr 9, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.50 per share.	28,750
Mar 27, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.45 per share.	28,175
Mar 18, 2014	CHAMOUN GEORGEOfficer	10,000	Direct	Option Exercise at $0.20 per share.	2,000
Mar 17, 2014	CHAMOUN GEORGEOfficer	5,000	Direct	Automatic Sale at $2.57 per share.	12,850
Mar 13, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.62 per share.	30,129
Mar 11, 2014	CHAMOUN GEORGEOfficer	20,000	Direct	Option Exercise at $0.20 per share.	4,000
Mar 10, 2014	CHAMOUN GEORGEOfficer	5,000	Direct	Automatic Sale at $2.59 per share.	12,950
Feb 12, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.49 per share.	28,635
Jan 30, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.42 per share.	27,830
Jan 15, 2014	CHAMOUN GEORGEOfficer	5,000	Direct	Automatic Sale at $2.60 per share.	13,000
Jan 15, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.60 per share.	29,899
Jan 15, 2014	CHAMOUN GEORGEOfficer	10,000	Direct	Option Exercise at $0.20 per share.	2,000
Jan 2, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.48 per share.	28,520

 

Share Performance: Synacor Inc vs. SKYY, IGV & SOCL

On Monday, small cap Synacor Inc fell 0.44% to $2.26 (SYNC has a 52 week trading range of $2.13 to $3.98 a share) for a market cap of $62.21 million plus the stock is down 7.8% since the start of the year, down 40% over the past year and down 56.9% since February 2012. Here is a look at the long term performance of Synacor Inc verses that of First Trust ISE Cloud Computing Index, iShares North American Tech-Software and Global X Social Media Index ETF:

As you can see from the above performance chart, the benchmarks First Trust ISE Cloud Computing Index, iShares North American Tech-Software and Global X Social Media Index ETF have given much more steady performances than Synacor Inc.

Finally, here are the latest technical charts for all four investments:

The Bottom Line. While Synacor Inc's recent income statement is not the greatest, the company is in an interesting space and some sequential business metrics are showing improvement. And just like many other companies in the online space, it still need to figure out how to make the trend towards the use of mobile devices to pay off – meaning investors who are into speculative plays should take a closer look at the stock.