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Altisource Portfolio Solutions is a Luxembourg based integrated service provider and marketplace for the real estate and mortgage industry in the United States and internationally. It provides foreclosure, short sale, and eviction management services. The company provides title insurance, risk mitigation, appraisal, inspection, trustee, and loan technology services to a variety of bank, non bank, and government customers.
Altisource runs a business-to-business company primarily focused on providing technology and related services to lenders. This involves appraisal, auction, inspection, etc. The company was a beneficiary of the 2008–2011 Housing Crisis where a flood of demand for foreclosure, short sale, and eviction related services propelled Altisource from under $6 a share to over $160 a share in 2013. Since 2013, the company has shown consistently declining revenues as the number of foreclosure and distressed property services utilized by lenders has steadily declined.
In short, $ASPS may be a potential counter-cyclical speculative play on the eventual lifting of foreclosure and eviction moratoriums. During 2020, Altisource’s revenue and earnings-per-share fell dramatically as the extended federal, state, and local foreclosure and eviction moratoriums essentially halted business. With a potential turn in the foreclosure cycle imminent, Altisource is poised to potentially return to profitability in the next 18–24 months. The tremendous backlog in lender demand for mortgage delinquency related services could eventually lift Altisource’s revenue and drive speculators back into Altisource’s low-volume, small cap stock.
Altisource has lost several key customers last year and faces increased competition in its declining market niche. Altisource’s cashflows have a high correlation to the foreclosure cycle. After foreclosure and eviction moratoriums are lifted, Altisource could see a dramatic rise in revenue within 12–18 months, a return to profitability, and some renewed optimism around the beaten down stock.
A risk is that foreclosure moratoriums are extended into mid-2022 or beyond under a blue government while the company continues to burn cash. A further risk is that since Altisource’s stock ($ASPS) has a market capitalization of only 146 million dollars, (making it small cap) a decline in this high beta stock could get $ASPS delisted into microcap territory causing institutional selling. $ASPS has been acting like a rollercoaster over the last 12 months due to multiple earnings misses, analyst downgrades, and moratorium extensions. Speculators need to be able to either stomach this volatility or buy puts on $ASPS for hedging.
With the stock crossing below the blue-line above (50-day Moving Average) in January along with a technical “death-cross” of the 50-day MA crossing below the 200 day MA in July of 2020; the stock has had abysmal performance aided by abysmal fundamentals. Due to the complicated nature of state, local, county, CDC, and federal eviction and foreclosure moratoriums, speculators in $ASPS stock should focus on the headline federal policy for properties with FHA or other federal financing. If federal moratoriums are extended past June and into 2022 or beyond, $ASPS is likely to retest the April lows of $7 a share as Mr. Market sells the news of a moratorium extension.
$ASPS could be a decent longer-term speculation or a portfolio hedge around an eventual rise in demand for mortgage delinquency services with potential multi-bagger upside, however this stock comes with serious volatility, market cap, and political risk.
Below is additional buy-side research from Seekingalpha.com:
Too Early To Buy Altisource Portfolio Solutions (NASDAQ:ASPS)
Altisource is an asset-light, counter-cyclical business model. The CARES Act will delay foreclosures until 2021…
Cautious investing everyone,
Disclaimer: the author Kevin Habek is not a registered financial advisor. This article constitutes the opinion of the author and should not be misconstrued as financial or investment advice. Stock and options speculation is highly risky and investors employing these investment strategies run the risk of losing all or more than their original invested principal. The author recommends readers perform their own research and due diligence and consult with a qualified investment professional before entering into any investments. The article in reference: “Altisource Portfolio Solutions $ASPS” by Kevin Habek, is designed for entertainment and informational purposes only.