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Thursday, October 29, 2020

Update on Penny Stock InterCloud Systems Inc (OTCMKTS:ICLD)

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InterCloud Systems Inc (OTCMKTS:ICLD) is a penny play in end-to-end IT that we have covered in the past, and the story has been clear: this is a balance sheet story. ICLD stock has been riding down Mount Pain for years after building up a massive debt load. However, lately, we are seeing some life come into shares as the company announced in January that they started the year with $200k in new contracts.

According to the company’s recent release, the majority of that work is set to begin immediately. That said, that runs up against over $17 million in total current liabilities and we believe much more in potential future conversions that could continue to dilute shareholders. However, on the bright side, that number was $44 million last Fall. So the burden is unwinding gradually. That said, it seems to us that the acceleration in revenues will need to be more substantial than we are seeing to really take shares out from under the shade of that balance sheet mountain.

InterCloud Systems Inc (OTCMKTS:ICLD) frames itself as a company that provides end-to-end IT and network solutions to the telecommunications service provider and corporate enterprise markets through cloud platforms and professional services in the United States and internationally. It operates through four segments: Applications and Infrastructure, Professional Services, Managed Services, and Cloud Services.

The company offers various services, including platform as a service, infrastructure as a service, database as a service, and software as a service; and network management, 24x7x365 monitoring, security monitoring, and storage and backup services. It also provides software-defined networking (SDN) training, SDN software development and integration, virtualized network functions validation in a multi-vendor environment, unified communications, interactive voice response, and session initiation protocol based call centers, as well as structured cabling and other field installations.

In addition, the company designs, engineers, installs, and maintains various types of Wi-Fi and wide-area, distributed antenna system, and small cell distribution networks for incumbent local exchange carriers, telecommunications original equipment manufacturers (OEMs), cable broadband multiple system operators, and enterprise customers, as well as designs, installs, and maintains hardware solutions for the OEMs that support voice, data, and optical networks.

Further, it provides consulting and professional staffing solutions to the service-provider and enterprise market in support of IT and next-generation networks comprising project management, network implementation, network installation, network upgrades, rebuilds, maintenance, and consulting services. Additionally, the company’s engineering, design, installation, and maintenance services support the build-out and operation of enterprise, fiber optic, Ethernet, and wireless networks.

InterCloud Systems, Inc. was founded in 2006 and is based in Shrewsbury, New Jersey.

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In the company’s most recent release, Mark Munro, CEO of InterCloud Systems, was relatively transparent with his treatment of the company’s burdensome road ahead.

“We have seen higher volume in our stock as of late, as lenders exercise their rights to convert their debt into equity. The pressure on the stock from the conversions of debt into equity is not a reflection on the operations of the Company. As we have previously disclosed, the Company is working very aggressively to secure more conventional asset based financing to help reduce these conversions. We are also working on the sale of non-core assets to eliminate some of this convertible debt as well. We continue to have a positive outlook for 2017 and anticipate that a stronger balance sheet, reduced operating expenses and continued marketing of our more profitable products and services will produce improved shareholder value in the future.”

Recent action has seen 36% tacked on to share pricing for the name in the past week, a bounce that has taken root amid largely bearish action over the larger time frame. What’s more, the name has benefitted from a jump in recent trading volume to the tune of a bit over 430% over the long run average.

This should not be overlooked with a float in play that stands at just under 61M shares. This type of thing is something to watch out for: a jump in average daily transaction volume in a stock with a restricted float can unleash fireworks as supply is squeezed.

Now commanding a market cap of $1.5M, ICLD has a significant war chest ($2.6M) of cash on the books, but that war chest is dwarfed by a mountain of debt that now stands at about $17.1M in total current liabilities. ICLD is pulling in trailing 12-month revenues of $71.4M. However, the company is seeing declines on the top line on a quarterly y/y basis, with revenues falling at -3.3%. We will update the story again soon as developments transpire. For continuing coverage on shares of $ICLD stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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