Borislav Tonev

Cereplast Inc (OTCMKTS:CERP) On The Rise In Anticipation Of Q2 Results

by Borislav Tonev August 12, 2013
9CERP.pngYou can see from the chart on the right that the last six months or so haven't been the most successful in Cereplast Inc (OTCMKTS:CERP, CERP message board)'s history. If you take a look at the stock movement from further back in time, you'll see that the slide started quite a while ago. Friday's session, however, ended with around 20% in gains and we're wondering if this is a sign that the trend is finally about to be reversed.

Well, it seems that everyone is standing on the edge of their seat and waiting for the report for the second quarter of 2013 which is due in a couple of day's time and by the looks of things, optimism seems to be predominant. The ticker jumped up on Friday and right now, just half an hour into the session, it's another 9% in the green. CERP themselves are at least partly responsible for all the excitement. They recently issued one of their preliminary-results-type press releases in which they say that that sales for the first six months of 2013 are expected to be around $1.7 million. That's a lot more compared to the first two quarters of 2012, but what happens when you break down the amount between the separate periods?

Let's assume that the first six months really resulted in $1.7 million in revenues. The official figure for Q2 is still unknown but we can find it by taking the results from Q1 out of the whole amount for the two quarters. If you do that, you'll find that the period between March 2013 and June 2013 resulted in around $750 thousand, which is $200 thousand less than the figure for the first quarter. This means that in three months, the revenues have actually decreased by around 22%. Hardly the massive growth that everyone's talking about.

Another thing that we're really worried about is the price movement. We've been following CERP for a while and we see that every time they're about to issue a new financial statement, they go on the news telling everybody how great the results are. This causes some stir and the increased interest drives the price in the right direction. There's nothing wrong with that, but what we're concerned about is the fact that the filings don't appear to live up to the high expectations.

In anticipation of the Q1 results, for example, CERP registered a couple of green sessions and managed to move from around $0.03 all the way up to around $0.043. Then, the 10Q came out and, apparently, investors weren't so happy with the results. So much so, in fact, that after just six and a half hours of trading, the ticker managed to wipe out all the gains finishing the day at $0.031. About a week later, it dropped below the $0.03 per share mark and right now, it's difficult to see how it will manage to reach similar values again.

Of course, the pumpers beg to differ and they initiated the next in a long line of promotional campaigns for CERP last week. The mailing activity was particularly intense during the period before Friday's session and you can see that it did have an effect.

9IALS.pngDamn Good Penny Picks is one of the most prominent outfits to take part, the people behind it received $25 thousand and they sent out two alerts talking about how dreadful plastic is and how CERP's products will take the world by storm. Then again, they were saying pretty much the same things about Interactive Leisure Systems Inc (OTCMKTS:IALS) a couple of days ago. IALS did respond to the artificial hype by making a massive jump, but it then came crashing down losing 52% in just three sessions.

History has taught us that CERP's performance under the pressure of promotions is no better which would suggest that although it's currently staying in the green, it could turn round and catch a lot of people off-guard.

It's not only the pumpers that could reverse the trend either. Last week a lot of people were eagerly expecting the Q2 results of another penny stock - Jones Soda Co. (OTCMKTS:JSDA). The report came out on Friday, but instead of going up, the ticker lost around 12% on an increased trading volume. Apparently, not all shareholders were happy with what they saw and, with all the facts above, we can't say that CERP is immune to such drops. Make sure you have this in mind while making your final decision.

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