Collector’s Universe (NASDAQ: CLCT) Isn’t Slowing Down

Even a (temporary) complete shutdown couldn’t slow Collector’s Universe’s NASDAQ: CLCT Professional Sports Authenticator (PSA) business.

Yesterday afternoon, Collector’s Universe reported record quarterly revenue of $20.5 million for its fourth quarter. PSA revenue came in at $9.6 million, up 27% yoy.

CLCT, which is headquartered in California, was forced to shut down in late Q3 and early Q4. The company was soon able to re-open, but forced to gradually ramp up capacity in accordance with the new safety guidelines.

While overall revenue was only up $700 million yoy – and down $1.3 million excluding PSA – CLCT’s performance during a tough Q4 provides plenty of optimism for the future.

Trading Card Market is On Fire

The trading card market was hot when I covered CLCT a couple of months ago.

Now, it’s scalding!

In my last article, I found around 176,000 PSA cards that had sold on eBay NASDAQ: EBAY for over $100 over the previous 90 days. Today, there are 232,000 PSA cards that meet those conditions – that’s a gain of over 30% in just a couple of months!

And while CLCT didn’t disclose its exact PSA backlog on the Q4 earnings call, the company revealed that it has a record backlog. For reference, PSA already had a backlog of more than one million cards at the end of Q3 2020.

On the Q4 earnings call, CEO Joseph Orlando said, “We have accelerated our on-boarding efforts substantially to better handle the demand for our services. There is no question that the need for social distancing has put pressure on the operation. In response, our team has reconfigured the relevant departments and introduced new shifts to help spread our employees out each day. In the short term, some efficiencies have been reduced, but the need for greater capacity is more important than ever.”

PSA is going to face an uphill battle working through its backlog during the pandemic. But Orlando’s efforts will mitigate the backlog’s growth and perhaps decrease it a bit over the next few months. And once operations return to normal, the company should be able to work through most of it.

Furthermore, service prices were recently increased and should increase revenue, but not hurt demand.

Professional Coin Grading Services Will Bounce Back

CLCT’s Professional Coin Grading Services (PCGS) division recorded $10.2 million in revenue during Q4, down 6% yoy.

Unlike PSA, this division wasn’t able to grow in spite of headwinds. Orlando said, “Even though the PCGS performance was solid overall in Q4, it is important to note that our coin business continues to deal with more pandemic-related challenges than our trading card, autograph, and memorabilia business.”

Fortunately for CLCT, the revenue decline was modest and PCGS can realistically achieve modest growth post-pandemic.

CLCT is Under-the-Radar

Countless stocks are covered by a dozen (or more) analysts and receive upgrades galore when business takes a turn for the better. But with CLCT, which just recently crossed from micro-cap to small-cap territory, there isn’t the same level of interest. Which increases the chances of shares being incorrectly priced.

Take the Q4 earnings call as an example:

There were no analyst questions after CLCT management concluded its opening remarks.

Is CLCT Still Undervalued?

CLCT has nearly doubled since I recommended it a couple of months ago, but I still believe it has more room to run.

While it is trading at around 39x TTM earnings, CLCT has a lot of growth potential moving forward.

PSA grew 27% yoy in Q4, and that was with the business-facing serious headwinds. Imagine how it will perform post-pandemic. A rapidly-growing PSA combined with a stable PCGS equates to a lot of upside for CLCT shares.

Chart is Extended

CLCT has spent the past 2+ weeks firmly in overbought territory on the RSI.

Even though shares are still a solid value at current levels, I would wait for them to consolidate before getting in.

Back in June, I said you should consider getting into CLCT soon – and possibly not insist on a perfect entry point. I only recommend doing that when shares are an incredible value. CLCT, as it stands, remains an attractive long-term play. But it’s not so cheap (anymore) that I’d consider ignoring the price action and simply buying and holding.

The Final Word

Investors have begun to price some of PSA’s upside into CLCT’s shares. But it’s not too late to get in – look to pick up some CLCT shares if a nice entry point materializes.