E EC USell: Renewed Growth Model Provides A Probable 100% Return Opportunity

Let’s look at the most recent revenue number and projections.

For the third quarter of 2014, revenues reached $1.4 million. On an operational level the company saw a 79% increase in orders placed through the system to 156k. The completed orders increased 86% to a total of 72k. So the completed orders rose even more than the orders placed. That’s interesting. That must mean that uSell’s marketplace has gained more trust from customers. The SEC filing stresses that the value of the orders increased as well, even though the total completed orders remained flat.

uSell also increased prices offered to sellers, leading to higher conversion rates and throughput, during the nine months ended September 30, 2014, compared to the nine months ended September, 2013.

So I project the upcoming quarters to be even better. What sure helped is that uSell experienced, according to this press release, a record inflow of orders partially thanks to Apple’s new iPhone 6. With a good level of stickiness of new customers flocking in, revenue could be ramped up significantly. The books of Q4 and beyond should reflect to what degree exactly. Overall, management emphasizes that the short term marketing & sales investment has provided a substantial strategic value that will be recognized throughout the fourth quarter and into next year.

Further unlocking the rapid growth potential, uSell announced it has introduced an enhanced service model called “managed by uSell” According to management, this new service greatly increases the ability to control its customer experience and dramatically improves the scalability of the uSell platform. In order to launch the Managed by uSell service, uSell has partnered with a 3rd party logistics company to inspect and process devices before passing them along to the buyers offering the highest prices for each device. This ensures that buyers get exactly the devices that they bid for, while sellers are provided a fair appraisal and quick payment. It remains to be seen how this exactly pans out, but if it’s true what management is saying, revenue could be ramped up even more thanks to this innovation. It’s the culmination of a 3-year-long research & development investment. I think management made a good point when they stated:

"The new technology that we have developed is aimed to reduce risk all around. This includes risk to sellers, risk to buyers, and risk to uSell. These reductions in risk will apply upward price pressure to our marketplace, which will in turn increase conversion rates,throughput, and customer satisfaction."

Another option for uSell to boost revenue is to include more household items in the market place. They exercised that option last year with textbooks and gift cards. The primary focus is still on smartphones, but if they feel the need to expand, they could incorporate other options fairly easy and quickly. Again I draw the comparison with Amazon, they sold only textbooks during the first 4 years of its existence.

Overall, uSell appears to be on the verge of major expansion.

The people leading uSell

Let’s check out the people leading uSell. Dan Brauser is the ‘Zuckerberg’ of uSell. Fairly young guy, very ambitious, and quite vocal about transforming uSell into a multi-billion dollar company. Here’s a list of his feats:

  • 1995: Sold Kertz Security Systems to Wayne Huizenga for $28million.
  • 1998: After a series of rollups in the security business, sold company to Ameritech for $660 million (now known as ADT).
  • 2001: Sold Naviant, an internet company he built to Equifax for$135 million.
  • 2004: Sold Seisint, a data fusion company that he co-founded in 1999, to Reed Elsiver (Lexis/Nexis) for $780 million.
  • 2009: Sold 5 to 1 (an internet company) to Yahoo for $28million.
  • 2010: Sold Interclick (an internet ad network) that he founded in 2007 to Yahoo for $280 million.

Can we add uSell to this list in the future? I don’t know, but his past successes sure inspires a lot of confidence. Next on the team is Christian Croft; Chief Product Officer & Co-founder. Nik Raman is the other Co-founder. He is the COO. Vijay Ganapathy is the Chief Technology Officer. The company recently made new key hires to strengthen its human capital. In total about 18 very high-skilled people work at uSell.

Management is well motivated to make uSell a success story. Their fixed pay is limited, while the options kick in only when the share price is considerably higher. Digging up the insider trading pattern reveals the next:

This is an insider trading pattern I love to see; only buying, no selling. Especially if you consider how low the market cap is today.

uSell’s financial condition

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Disclosure: Long uSell. Please do your due diligence before investing.

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Comments

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George Lipton 5 years ago Member's comment

Hard to find current coverage on this stock. Have any updates on this or other stocks worth keeping an eye on?

Vintage Vixen 5 years ago Member's comment
Any updates on this report?
Kate Hayden 5 years ago Contributor's comment

Thank you for the extremely detailed report. I am certainly thinking about this much more than I would have otherwise.

Small Cap Gems 5 years ago Author's comment

Another insider buy two days ago: The CEO bought 3000 shares in the open market.

Kate Hayden 5 years ago Contributor's comment

It's also encouraging to see an author add insights to an article. I know this site is still small and new but I'm encouraged by the level of commentary.

Stock Sanity 5 years ago Member's comment

That's encouraging news!

Harry Sinclair 5 years ago Member's comment

I picked up some of this stock after reading John Ford's analysis and hint that it could be an acquisition target for ebay. The expected increase never materialized but I still have hopes for USEL. I agree that it is a gem and is under-priced.