StoyTrading previously discovered a yet un-announced nugget regarding Sprint’s launch of a new Tracker with SMSI’s Safe & Found. As published on that day, we predicted a new bull direction in the stock and it acted on cue – moving up from $2.84 close the prior day to a high of $3.30 a few days later.
However, in recent days the stock has been down. Gauging by the sentiment in our group of 180+ SMSI shareholders, it’s likely the stock is down due to poor app reviews since the latest Safe & Found app update (which supports the new Sprint Tracker) as can be seen here and here. These bad reviews were known for some time by our group and we were the first to recognize that SMSI switched from a premium map offering to a cheaper map offering to keep margins high with the Sprint Tracker launch. This information was verified in a conversation with management. This alone, did not alarm our group. The company will make the right decision regarding which map service they should use. However, more recently, we’ve taken a closer look at app reviews and noticed that there are several other potentially critical bugs with this app release. As such, some of our members lightened up their position in recent days until these issues can be resolved. Further, today’s selling was exacerbated by screen shots shared last night from a member in our group confirming some of these bugs.
The bulls in our group feel this is just simple software issues which SMSI is well-equipped to fix in a reasonable time-span and it won’t impact the fundamental story. The bears believe these app glitches may increase churn and risk the relationship long-term with Sprint. Today’s push and pull in the stock price is likely related to this battle between bulls and bears.
It’s not all bad news! Our group has been doing channel checks on Sprint Tracker sales and building out an operating model for the potential revenue and EPS impact this launch will have on 2019 and 2020 financials. The numbers could be mind-blowing. One store alone in Lincoln, Nebraska has sold 22 trackers or 1.7 trackers a day since launch. This may not seem like alot but it’s massive (see below excel). At only 0.3 trackers sold per day across the 4,500 Sprint stores, and including a 10% conversion ratio to Safe & Found, Sprint Tracker can bring in over $5M in additional revenue to SMSI at 90% gross margins! If one store can average 1.7 trackers sold a day, it seems in-reach for the average of all stores to be far beyond just 0.3 trackers a day. It only takes some modest assumptions to recognize that the Sprint Tracker deal alone could be worth several dollars in stock value to SMSI.
It’s clear Sprint is committed to this launch and it could be very significant to SMSI… but this could give bears a reason to worry too. Is Sprint upset with SMSI for delivering a buggy app for their big launch? Time will tell!