Cheap Stocks

We focus on undervalued small-cap stocks. Usually with a large cash cushion. We have developed a valuation formula that has been highly successful, especially on small tech stocks. Since 2006, we have closed out 49 stock positions with an average gain of 37%. 9 stocks have been taken over.

Wednesday, April 18, 2007

Celebrate Express, Inc. (NASDAQ--BDAY)

Celebrate Express, Inc. (NASDAQ--BDAY)
Valuation-$18.18
Closing price April 18, 2007-$8.82

This one is a bit different for us, as BDAY is a retailer, but like Amazon, it only sells online. BDAY is recovering from a distribution snafu last year. Management now says that this is behind them and it is onward and upward from here.

Q3 results (2/28/2007) showed an 11% sales drop and a $137,000 loss (down from the prior year).There a bit under 8 million shares outstanding and they reported 55% gross margins and have $2.78 a share in cash (after a special $1.25 per share dividend that went to record holders as of April 12, 2007). We are betting on BDAY rebounding from their distribution woes and winning customers back (although this will take some marketing dollars to do). Q3 is also historically one of their lowest sales volume quarters.

Our valuation is based on $82 million in annual sales (they should easily beat this) and a small annual book loss.

One director and another insider have been buying a lot of shares from $8.75 to $10 in 2007 so far.

We bought some this week at $8.85. Average daily trading volume has been nearly 100,000 shares a day, although the past few days it has been closer to 30,000 shares.

We think anything under $9.00 is a good price.

BDAY is trading at 49% of our valuation.

About Celebrate Express, Inc.
Celebrate Express is a leading online and catalog retailer of celebration products serving families with young children. The Company currently operates two brands: Birthday Express markets children's party products, and Costume Express markets costumes and accessories. The Company utilizes its branded website Celebrateexpress.com, complemented by its branded catalogs, to offer products as complete coordinated solutions. The Company's goal is to help families celebrate the special moments in their lives. For more information, please visit www.celebrateexpress.com.

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