Vapor Corp Ready to Ride the Electronic Cigarette Evolution Higher

Vapor Corp Ready to Ride the Electronic Cigarette Evolution Higher

By: Dylan Sikes - AllPennyStocks.com News

Tuesday, March 12, 2013

Electronic cigarettes, or e-cigs, have undergone a heavy dose of promotional activity in the past year. Unlike traditional cigarettes that burn tobacco, e-cigs heat a liquid nicotine solution to create a vapor that is inhaled, supposedly providing the user with the same smoking pleasure without the smoke or plethora of chemicals. It seems as if nearly everyone has seen the commercial featuring Blade actor Stephen Dorff acting all suave promoting Blu electronic cigarettes that was part of a national advertising blitz. According to the Centers for Disease Control and Prevention last month, the promotions are leading to more and more people trying to burn-less form of cigarettes. The CDC said that, in 2012, the number of smokers who have tried e-cigs jumped to 21 percent from 10 percent in 2011, which was up from 2.7 percent in 2010 and 0.6 percent in 2009. There’s a reason that cigarette giant Lorillard Inc. (NYSE:LO) dished-out $135 million in cash to buy Blue Ecigs last April, making them the first major tobacco company in the e-cig market.


Investors not interested in paying $40 per share for Lorillard, may be interested in taking a look at Vapor Corp. (OTCBB:VPCO), a Fort Lauderdale, Florida-based maker of e-cig brands Fifty-One, Krave, Green Puffer and EZ Smoker. EZ Smoker is sold on the popular As Seen on TV (OTCBB:ASTV) website. Vapor Corp. has been featured in The New York Times, CNBC, Bloomberg, CNN and more, where it’s been mentioned alongside giants like Lorillard for its position in the industry.

The company is now in its fifth year of operations, growing from a mere four employees to near 50 in that time. Sales have ascended at about a 50 percent per year growth rate from $800,000 in the first year to $16 million in sales through the first nine months of 2012. Compared to operating profitably in the first nine months of 2011, Vapor swung to a loss in the 2012 period, largely because of tighter margins and increasing the size of its staff. Going forward, look for a return to profitability as the volatile effects of increasing staff will level and because the company has cut costs of traditional advertising and increased Internet campaigns. These prescient moves will lead to greater direct-to-consumer sales, the highest margin sales for a company.

In comparison, Lorillard’s blue e-cigs generated about $30 million in sales in 2011; Vapor Corp. is not far behind. The e-cig industry as a whole generates sales between $250 million to $500 million annually. This translates to Vapor controlling roughly 5 percent to 10 percent of the market.

If market capitalization is a reflection of future sales, it’s not an exaggeration to dub Vapor Corp. as “undervalued” with its $35.5 million market cap, considering 2012 sales should be in the area of $20 million or more.

From a technical perspective, the stock price is sitting on 60 cents, a common area of support for 2013 (and even going back several years). A channel has been formed with resistance at the top end at 75 cents, giving better than a 20 percent climb from current levels to that point. Above that, it’s pretty much smooth sailing as the stock has spiked as high as $1.50 in January, representing one of the few areas that could be considered future resistance.

Forbes said in October that the e-cig industry is poised to explode as the products continue to gain popularity and interest from big tobacco. E-cigs are still only a tiny fraction of the $100 billion U.S. tobacco market, giving it – and Vapor Corp. – a tremendous upside in the near term.

Proper due diligence is, as always, encouraged.

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