Is SURG a Massive Disruptor Headed for Exponential Growth and $7/Share?

Date : January 13, 2020

New Opportunity: Surge Holdings Inc. (OTCQB:SURG)

  • Redefining digital commerce for the Underbanked marketplace through huge network of c-store relationships
  • Recent acquisition to add 9,800 stores to Surge Network, push Revenues to $68M annualized pace
  • Made Deloitte’s exclusive “Technology Fast 500” list as one of the fastest growing companies in North America in 2019
  • Recent analyst research projects nearly 1,000% upside potential for shares
  • Expect sharp vertical and horizontal top-line growth as footprint and array expand exponentially

Surge is surging right now, and may be one of the most undervalued small-cap names in the market when limiting parameters to companies with significant and rapidly growing revenues.

This is a supply chain story with a huge disruptive angle that is starting to drive exponential growth now that the company has fully launched all products and services. We like the story. A lot. Really. The market is valuing this stock at 0.5x forward sales. Alibaba (BABA), another supply chain disruption play, trades with a price/sales of over 10x. A similar valuation standard for SURG (which is growing much faster, by the way) would put the stock at $7/share.

The stock trades at $0.35/share today.

Here’s how to understand this opportunity: Almost a third of the US population is considered “underbanked”, which describes people or organizations who lack sufficient access to mainstream financial services and products typically offered by retail banks, and generally don’t have access to credit cards or loans.

SURG reaches this market through a network of convenience store community “hubs”.  For mobile phone service, electronic check service, and a range of products, and services provided through a network of convenience store community “hubs”, SURG is an innovator at targeting this underbanked market.

This layer of relationships and transactions creates an infrastructure that Surge has mobilized into an increasingly promising Trojan Horse invasion of the regional supply chain space – Surge is setting up to effectively disrupt the supply chain framework that has complacently supported commerce at convenience stores, bodegas, tiendas and community markets across North America for decades.

That framework has grown stale and increasingly inefficient over time, shielded by multi-billion-dollar global brand giants as the world around it evolves into a more efficient landscape in almost all other domains.

In other words, regional consumer goods and its supportive supply chain infrastructure is a marketplace shockingly ripe for some realigning bottom-up disruption.

Surge is leading the way in that invasion, wrenching open a multi-billion dollar opportunity that is just now starting to show up in the company’s tangible performance. The model is still dealing with small numbers in a vast open terrain, suggesting that a combination of compounding horizontal and vertical growth in this area may drive exponential growth for the company.

Surge is a giant still crammed into a tiny box. But the seams are starting to crack open.

The company is now growing so fast it was just put on Deloitte’s coveted “Fast 500” list for technology companies in North America. In other words, right now, SURG is one of the fastest growing tech/innovation companies on the planet. And that’s before incorporating its massive ECS acquisition, which is set to shift that growth curve into an entirely new gear, as the network grows by nearly 10,000 new locations in one fell swoop.


Symbol: 
SURG
Company:  Surge Holdings Inc.
Quote:  http://finance.yahoo.com/q?s=SURG
Latest News: 
http://finance.yahoo.com/q/h?s=SURG+Headlines
Company Website:
https://surgeholdings.com and https://surgepays.com

Who is SURG

Surge Holdings Inc. (OTCMKTS:SURG) is a retail supply chain company that provides a virtual wholesale marketplace hub for retailers, as well as telecom services for low income customers and financial payment services for the unbanked and underbanked.

Surge products are delivered through a nationwide network of convenience stores and corner markets connected to the recently launched SurgePays Network.

This retail platform is designed to transform the traditional supply chain by providing local retailers seamless access to global products and to empower the corner store to select, order and fulfill delivery of wholesale goods from around the country.

This platform also provides manufacturers a cost-effective and efficient platform to access point of sale retailers nationwide.

The CEO has published his vision in detail: “My strategy for business building over the last 18 years has been based on recurring revenue from providing life-enhancing technology products for the underbanked with a focus on “Relationships.” During this time period, the market has grown to over 100 million prepaid wireless users in the USA with approximately 35% of the country now falling into the underbanked category. This is the last digital frontier and Surge is positioned for the land grab.

“While Surge is a holding company with several subsidiaries, our core value will be driven by our SurgePays Marketplace Software. The SurgePays Marketplace is built on Blockchain Technology and has created a new sales channel that disrupts the traditional c-store distribution and products sales model by providing local retailers direct access to regional manufacturers from around the country. This Marketplace software platform additionally provides manufacturers a lower cost and more efficient platform to access mom-n-pop retailers to sell products nationwide without the need to offer cash-flow crunching “net” terms to distributors.

“My personal goal is to have 100,000 convenience store locations in our SurgePays network with each store processing an average of $1,500 – $2,500 a month by 2021. We will also explore M&A strategies to own more brands we can input into our distribution channel.

“Our exceptional team is over 125 members strong in Memphis, Chicago, Atlanta, Las Vegas, and El Salvador. We have built to scale far beyond what is required to not only uplist to NASDAQ, but to push far beyond that initial goal by leveraging the increased liquidity and exposure to hit the gas even harder while accelerating revenue growth.”

Recent Catalysts

In terms of catalysts, the big story is the company’s recent acquisition of ECS – adding 9,800 stores to the Surge network, $48.7 million of annualized revenue already completing over 18,000 transactions a day.

That’s going to mean a massive expansion in the footprint for the Surge network. The way this works is that footprint widens the channel for future expansion as each new location in the network is then maximized through product expansion. In other words, adding more store locations in the network adds immediate growth, but also new low-hanging opportunities for even more future growth.

The company also recently reported more stellar growth data. Consider that this is a company that did $1,429,872 in sales for 2017. Q3 2019 showed Quarterly Revs of $4.9 million, which is $19.6 million annualized. When we add ECS post-acquisition forward expectations into that mix, we are looking at a company now trading on a forward annualized top-line of $68 million, which is 4,600% growth in two years from a base that was already well into 7 figures!

Another key catalyst in the mix right now was Deloitte’s move to recognize SURG as one of the fastest growing tech/innovation companies in North America in 2019. Given what appears to lie ahead, we wouldn’t be surprised to see Surge on that list as a mainstay for years to come.

We would also encourage readers to listen to the CEO in his recent SmallCapVoice interview, which can be found here.

Technical Analysis

SURG shares are in a bullish posture after holding key support in a strong base formation that pivoted off the $0.25-0.30 support zone. That level now forms the key launching point. And the stock does appear to be launching – up now over 15% in the past two trading sessions on steadily rising volume.

This base is defined by a stunning bullish RSI divergence that often marks key pivots from bearish to bullish trends. The pattern suggests the base has been holding and trailing sideways for a period after major selling – which defined the prior bear trend – had been exhausted for some time. In other words, this stock could be ripe for some big upside potential now that the bull has been awakened to kick off 2020.

Initial resistance levels sit at $0.42, $0.68, and $1/share, but a recent analyst report sees much more upside, placing a target at the $3.25/share level.

About SURG

SURG (Surge Holdings Inc.) is a retail supply chain company that provides a virtual wholesale marketplace hub for retailers, as well as telecom services for low income customers and financial payment services for the unbanked and underbanked.

Surge products are delivered through a nationwide network of convenience stores and corner markets connected to the recently launched SurgePays Network.

This retail platform is designed to transform the traditional supply chain by providing local retailers seamless access to global products and to empower the corner store to select, order and fulfill delivery of wholesale goods from around the country.

This platform also provides manufacturers a cost-effective and efficient platform to access point of sale retailers nationwide.

Key Points:

  • SURG is attacking the part of the digital commerce map that no one else has managed to conquer: the underbanked in the developed economies, which represents a massive market world hundreds of billions.
  • SURG is already making real money, with trailing revs coming in at $16M, and forward revs set for $68M
  • SURG is starting to see major topline growth, with total top-line growth over two years moving toward 4,600%
  • SURG acquisition of ECS added $48 million in annualized revenue and 9,800 retail stores
  • SURG shares recently received a target at the $3.25 level from Goldman Small Cap Research, representing 983% potential upside for shares according to this analysis.
  • SURG is coming off a potent bullish RSI divergence as volume picks up and the stock moves out of its supportive base with fresh momentum.

Conclusion

The big point with this story is this: the 21st century model of commerce for most people in developed world economies is quickly becoming the Amazon/ecommerce model of browse, point, click, and pay with a credit card.

For investors, that book is already written. The map is done. We know exactly who the big winners are and how that game is played. But there are about 100 million people in the US alone who have been left out of this picture.

SURG is predicating its value proposition for investors by moving on what amounts to the Final Frontier of the digital commerce model for the developed world. Surge is committed to presenting a digital solution for selling goods and services to people who don’t have the financial standing to make simple bank/credit based online purchases.

SURG is using blockchain technology and its strong partnership network of relationships to plot a new path for supply chain and fintech to provide a new means of commerce for the 100 million US residents unable to participate in 21st century digital consumer activity because of a lack of access to core banking and credit services.

SURG deserves immediate attention while the stock still sits at bargain basement levels and the momentum starts to pick up.

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