Spongetech Investors Bullish on Future
Spongetech Delivery Systems, Inc. [[SPNG.OB]] announced new national ad campaigns earlier this month and it has been infiltrating the airwaves ever since. From CNBC to ESPN, the company’s advertisements have been seen by millions throughout the United States. The company then launched a new line of medical sponges and hand-drying chamois designed to combat the swine flu by disinfecting hands and surfaces.
The advertising campaign has been hailed by the Spongetech as a fleeting success. The company reported selling more than $3 million worth of sponges during the first week in April, along with strong results throughout the month. Investors are hoping that the company will now be well-positioned to capitalize on the flu prevention market with the outbreak of the swine flu. Combined, advertising campaigns could push sales much higher.
Spongetech sells a wide variety of sponges that include soap, so consumers can just wet the sponge and start using it. The patented process allows the company to embed dehydrated active product ingredients into the sponge, while keeping dirt out. This creates a product that is cheap to produce, convenient for consumers, and capable of generating repeat business over the years. It is this formula that has created success for the company to date.
Despite the strong potential, there are several risks associated with Spongetech’s stock. The company was profitable during its latest quarter, but advertising expenses are likely to rise during future quarters. It is unclear how these expenses will impact gross margins and net income levels. Moreover, the company has issued a substantial number of new shares year-over-year, which suggests that management is willing to raise equity capital that could dilute existing shareholders.
In the end, Spongetech has a strong product line and revenue model backed by patented research. The company’s rapid expansion leaves some questions unanswered until the next earnings release comes out, but investors are seeing a large amount of sales come through the door thanks to its new nationwide advertising campaign. As a result, prudent investors may want to sit on the sidelines until hard figures come out, while speculators may want to take a closer look now.
CONTACT: Daniel Minton, Managing Director, 406-862-5400, daniel@accelerize.com