Will Helios and Matheson Continue to Rise
It's been a rough three months for Helios and Matheson (HMNY) investors. In HMNY's heyday, Wall Street bulls clamored for its majority-owned subsidiary MoviePass - hailed as a future Netflix (NFLX) disruptor of the movie theater market.
HMNY Turns Falling Knife
Then May hit. An SEC filing delivered a bad blow to the company's market sentiment. Questions of cash burn and sustainability started to plague the stock's story. Suddenly, HMNY went from hotshot to washout. The tech stock spit out nearly 82% in value in the breath of a month.
Flash forward to this past Friday, and Helios and Matheson investors once again were met with a nosedive: shares went headfirst almost 71%.
Here's why - MoviePass CEO Mitch Lowe waved a white flag of apology. On Thursday, the platform had gone down. What spurred the outage? An SEC filing surfaced showing the ghosts of bleeding cash flow meant HMNY lacked the funds to pay for tickets. Lowe assured customers the challenges had been addressed "on the back-end" and the "app is now up-and-running with stability at 100%." That said, Lowe likewise warned: "As we continue to evolve the service, certain movies may not always be available in every theater on our platform." The leader thanked subscribers for their "patience and ... ongoing support."
The stock recovered 16% in after-hours trading Friday night. Yet, this still begs the question: can a stock that has crashed to $2.00 - and under 4 million in market cap - save itself?
Not even a 16% rally will turn sour investors away from a once golden egg stock now turned poor bet. This story boils down to cash burn vs. subscriber growth. The former has Wall Street antsy, and the latter gives cautious optimists hope for a rebound long-term.
Here, we use TipRanks market data to investigate the word on the Street. What does the outlook indicate for this volatile tech stock? Do sell-side analysts see room for a snap back? Let's take a closer look.
Forecast: Cash Cloudy (with Profitability in 2020)
Maxim's Allen Klee (Profile & Recommendations) assumed coverage on Thursday with a Hold rating, downgrading HMNY from a Buy. Klee also scrubbed the price target. The analyst is "cautious" on the company's looming capital needs.
"MoviePass (MP) has demonstrated significant subscriber growth but is losing money for each average subscriber. As the company grows its scale, we expect increased revenue and cost savings," writes Klee, calling cash burn "significant." It's a challenge that HMNY is set to rely so heavily on capital raises to sustain itself.
Running the numbers, Klee projects this year will see HMNY raise equity at the rate of a whopping $339 million cash burn and $151 million by next year. By 2020, the analyst anticipates the share count here will hit 12.9 million. Klee expects HMNY will face a $280 million non-GAAP net loss this year and $143 million by next year. However, the analyst does see a silver lining in the distance: the company could turn to $56 million in net positive net income two years from now.
"HMNY represents a high risk/reward situation, in our view. The stock currently trades at 0.1x our 2018 revenue estimate of $439 million," adds Klee. The analyst is "optimistic" when it comes to HMNY's opportunity to keep subscriber growth fired up. However, it's the crutch for monster future capital that turns Klee to the sidelines on the company.
Short-term, the analyst can't overlook the cash burn challenges. However, could the stock become a compelling bet again down the road? Klee wagers yes: "Longer term, assuming the company is able to raise capital, we believe HMNY can provide a valuable and profitable service to theaters, movie producers and distributors based on its scale and ability to drive traffic."
Over time, MoviePass could boost scale and showcase its power to "drive traffic." HMNY will gain pull in negotiating discounts on purchased tickets, continues Klee, who believes this will offer a lift to advertising-related revenue. Meanwhile, "surge pricing can be a benefit" here. Movie investments likewise could translate to further revenues ranging from both "traditional and non-traditional sales."
It appears MoviePass may still be the Netflix of the movie theater space just yet. After all, Klee argues, consider that Netflix is a prime example of a player that has proven "very successful with flat monthly pricing plans" - all while being "afforded high valuations in the market despite a lack of profitability."
The Bigger Picture
TipRanks likewise shows two other bulls in HMNY's corner within the last six months.
Back in April, Canaccord's Austin Moldow (Profile & Recommendations) had said in April he believed HMNY had the potential to reach 12 million subscribers in the next four years.
In February, Maxim's Brian Kinstlinger (Profile & Recommendations) had seen a slew of channels for HMNY to monetize its massive user base and hike profitability.
Maxim's Allen Klee is the most recent analyst to cover HMNY, and has fled the bullish camp. That said, even Klee remains enticed by the very subscriber base that had two bulls cheering for HMNY before its troubles emerged. Can the tech mover and shaker disrupt the movie market following so many negative hurdles? Stay tuned to see if this dark horse can make its way back to Wall Street's good graces.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
This article was written by
TipRanks is the most comprehensive data set of sell side analysts, hedge fund managers, financial bloggers, and corporate insiders. We rank financial experts based on measured performance and the accuracy of their predictions. We aim to make Wall Street more transparent by highlighting which experts can consistently outperform the market, allowing investors to make the most informed investment decisions.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Source: https://seekingalpha.com/article/4191837-can-helios-and-matheson-snap-back-maybe-2020
0 Response to "Will Helios and Matheson Continue to Rise"
Post a Comment