Kodak Looks to Cryptocurrency

Stock down -61.82% over the past year. Investors watching new blockchain platform KodakOne.

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Aug 13, 2018
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Eastman Kodak (KODK, Financial) saw substantial gains in January, with the stock reaching a high of $11.55 after reporting a new crypto-secured token offering.

Since the January high, the stock is now down to $3.17 and the delayed token offering, which opened on May 21, appears to be adding to already high expenses for the company. The second-quarter earnings provide some new insights into the stock's direction as investors continue to hope new fintech innovation could help push it back to new highs.

Second-quarter results

Kodak reported revenue of $372 million for the second quarter, resulting in net earnings of $4 million.

Revenue

Revenue of $372 million was down -2% from the comparable quarter. For the year, revenue is now down -1%. The company’s two business lines, Sales and Service, both have declining revenue for the comparable quarter and year.

Earnings

Net earnings for the company were $4 million in the second quarter, unchanged from $4 million in the second quarter of 2017. For the year, net earnings are now at -$21 million, compared to $11 million for 2017.

Both direct and indirect costs are extremely high for the company, inhibiting its earnings growth. In 2018, the gross margin from the company’s two combined business lines is at 16%. Total indirect expenses of $157 million for the year deducted from any potential profit, leaving the company with an operating loss before interest and taxes of -$43 million.

Potential growth catalysts

In January, the company announced KodakOne and KodakCoin. The company has been allotting a great deal of spending to the platform and token in 2018, contributing to much of the higher costs. The KodakOne initiative is being led by WENN Digital with efforts for a blockchain-based image rights management platform and a secured cryptocurrency token offering under the name KodakCoin for funding. The offering opened on May 21 after a nearly five-month delay.

In August, Kodak also announced the potential sale of its Flexographic Packaging Division. Full details on the sale price have not been fully disclosed. The sale could help the company decrease expenses and lower its interest debt payments, which have also been weighing on the bottom line.

Return and future value

Over the past month, the company’s stock has fallen -19.23%. For the one-year and three-year periods, the total annualized return is -61.82% and -40.85% respectively. Analysts are not seeing a great deal of value generation in the short term with the estimated one-year target price of the stock at $1.

Coverage on the stock is limited, which has increased its volatility. Investors will be watching the initial coin offering of KodakCoin as it is expected to raise approximately $50 million for the blockchain-powered image rights management platform. Despite the new innovation, expenses for the business continue to remain extremely high with the addition of KodakOne expected to cause further drag on margins in the near term.

Disclosure: I own Kodak.