Key Points

  • Company has passed inflection point to transition to non-dilutive disruptive growth function, with potential to drive $60-80M in annualized sales over coming quarters
  • New $30 mobile plan to help foster disruption of established marketplace, realign market leadership and catalyze growth of core SurgePays model
  • Many factors not priced properly into shares: $50M wireless revs, Deloitte Fast 500 ranking, compounding exponential growth
  • Cash flows from mobile business and Surge Logics will bridge-finance quantum leap to “big picture” disruptive growth as revolutionary innovator in regional supply chain marketplace

Surge Holdings Inc. (OTCMKTS:SURG) is poised for potentially substantial growth over coming months and over the long-term provided the company manages to translate a spectacular state of current prepotency into actual returns for shareholders over the near and intermediate term.

Perhaps it’s not uncommon to be able to imagine “big success” under just the right circumstances for a great many different small-cap publicly-traded companies. But, at present, we believe SURG is a special case: a remarkable situation in which the company has already definitively and possibly irrevocably set in motion the terms for revolutionary growth and success, but the market has yet to reprice the stock proportionately.

In short, SURG shares are undervalued and underappreciated by the market because its recent past is dominated by scaling growth driven by intensive capital needs. But the company’s recent financial data and its news cycle suggests this phase is now over, and we are seeing the company transition into a new stage of cash-flow positive growth that should translate into a revaluation of its equity.

This is supported by a combination of strong current and coming performance of its Surge Logics segment, dramatic growth in its legacy Surge mobile business, and continued development of its next-generation SurgePays Network, which is the real disruptive story here.

Coming to a Head

The most explosive factor in the SURG story is imminent growth potential. According to the company, and from extrapolatable data, we are likely to see continued and accelerating top-line growth from organic and M&A activity that could reach nearly 5,000% on an annualized basis this year across a two-year period. In fact, just looking backward, the company already qualified from the prestigious Deloitte Fast 500 list of the fastest growing technology companies in the US.

But, looking ahead, that growth sprint is likely to accelerate dramatically as the company fully integrates and exploits its recent acquisition of the ECS Prepaid Network, adding over $48.7 million is sales across 9,800 retail locations with significant cross-sell opportunities for other Surge products and services as the prepaid mobile opportunity is graduated into the SurgePays regional supply chain solution.

Before Q4 2019, the stock was weighed down by a sense that the corner hadn’t yet been turned. Hence, investors were unable to see the light at the end of the development-financing tunnel. However, as we near the end of Q1 2020, there are abundant signals that the corner has been decisively turned, and the light is blinding.

The company’s Surge Logics segment is set to produce record revenues in Q1 thru Q3, which will, according to the company, help to position operations on a cash-flow-positive ramp as it begins to produce compounding exponential growth by expanding both horizontally and vertically in its SurgePays Network.

The Big Picture

The most important point to make for Surge right now is that the big picture model for the company is no longer abstract and theoretical. The strategy is in place and already starting to pay off. The fact that the market hasn’t noticed it yet should simply speak to the opportunity now present for new investment allocations to the company’s equity.

Much of this sense springs from the company’s recent ECS acquisition, which will drive $48.7 million of top line revenue as a simplistic, base-case outcome. But the real meat on the bone here is about the expansion in the network for its SurgePays model, which stands to expand that estimate dramatically because the move also brought in 9,800 new locations – that’s 9,800 new marketplaces that can be exploited and expanded through the precise type of execution that this management team excels at.

The company was built to take advantage of this moment. And the network expansion provides a massive influx of market data: Surge sees all the data from other wireless providers at these locations. Hence, the precise design of its new $30 wireless offering was likely a best-fit strategy culled from that data for establishing dominance in that market.

Another clue here is the fact that the company added a new national sales direction just days after announcing that plan. Folks with those qualifications don’t step into a role like that unless they can see the prepotency.

That prepotency will potentially drive massive growth in the company’s mobile segment, which then folds seamlessly into its wider disruptive SurgePays model.

One should note statements from the company’s CEO to close out last month: look for over $50 million in new Surge Wireless sales. That would be a game-changer. And the stock isn’t priced for such a shift. But a quick glance at the numbers shows how remarkably easy this may be for the company to achieve: $50 million in annualized sales from new mobile customers boils down to just over $4 million/month. With its new $30/month plan, the company will need 140K new Surge Wireless contracts per month. ECS is doing over 20K transactions every single day, or over 600K/month. If the company nabs just 2% of that, we see that $50 million hit the top-line. 

But – and this is really the big, big point – that’s just the tip of the iceberg because those locations then come into the SurgePays Network of supply chain management, and the vertical expansion can take hold from there, and drive those numbers up by 2x, 3x, 5x, 10x, etc.As far as we can see, absolutely none of this growth has been factored into shares of the stock at this point. Hence, even an implausibly worst-case outcome over the next 3-6 month should still represent a game-changing positive shock for SURG.