x min read

Here's Why Helios and Matheson Analytics Inc (NASDAQ:HMNY) Is Still Attractive

Here's Why Helios and Matheson Analytics Inc (NASDAQ:HMNY) Is Still Attractive
Written by
Chris Sandburg
Published on
October 31, 2017
Copy URL
Share on LinkedIn
Share on Reddit
Share on Twitter/X
Share on Facebook
InsidrFinancial

Over the last few months, we've spent a considerable amount of time covering Helios and Matheson Analytics Inc (NASDAQ:HMNY).The company has been about as volatile as can be across the period, running from around $2 a share at the end of August to close to $35 by mid-October, before correcting steeply across the last two weeks to trade in and around $10 a piece currently.Action on Monday saw 16% wiped from the company's market capitalization as Bloomberg published this piece, outlining the less than perfect track record of Helios CEO, Ted Farnsworth, across a variety of ventures over the last couple of decades. HMNY Daily ChartSure, this is a company that has had a large revaluation on a spike in speculative attention and – sure – it' probably going to lose money for a couple of years, but there's the real potential for growth long term and we think there may be some value in grabbing an exposure to Helios while prices are depressed.For anyone new to the situation, Helios is a data analytics company that basically crunches numbers for companies that are looking to monetize their data. It's not Helios that's getting markets excited, however. Instead, it's a company called Moviepass. Moviepass is a sort of subscription type service company that allows customers to gain access to unlimited monthly movies (well, not technically unlimited, but one per day) for a fixed monthly fee. Think Netflix but with movies.The company reported this week that its subscriber count has risen from just 20,000 to around 650,000 this year alone and it's this growth that's driving sentiment for the stock right now.There's a catch, however, and it's this catch that's causing some suggest that the model is flawed – in order to spark the just mentioned dramatic rise in users, Moviepass had to slash its monthly subscription rate from $30 to less than $10.This means that the company is quickly going to start losing money if users of the service go to more than one movie a month.For us, this is a problem and it's not.Near-term, it means that Moviepass (and, by proxy, Helios, which owns 51% of the subscription company) isn’t going to be posting a net profit for the foreseeable future. That's going to translate to some pretty weak standard valuation metrics and this – in turn – is going to result in a portion of the market (that which relies on said metrics to make buy and sell decisions) steering clear.Look a little deeper, however, and there's the potential for some smart revenue streams that should mitigate a portion of the losses taken on regular cinema visits near term and, longer term, could completely negate themHelios is a data analytics company. The movie theatre space is desperately in need of an update and the reason it hasn’t had one (while other industries in the entertainment arena have) is that moviegoer data isn’t available to anywhere near the degree that, say, movie streaming data is.If Helios can change this, and the target user count of 4.5 million subscribers by mid-next year suggests it can, there's a real chance that the company can drive high scale change in the sector.In other words, the more its users go to the cinema, the more money the company loses on having to pay for the visits, but the more money it can command from the data it collects about its users on each visit.Loss leading is risky and the volatility we are seeing in this stock right now is a symptom of such. Keep this in mind ahead of taking a position. With that said, we've seen companies successfully execute on a loss-leading strategy in the past and – while it's down – we thing Helios is well worth a punt on a long-term growth thesis.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on HMNY, sign up below!Image courtesy of Phillip Pessar via FlickrDisclosure: We have no position in HMNY and have not been compensated for this article.

Discover Hidden Gems

Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.