Shares of Net Element International Inc (NASDAQ:NETE) soared 45% to $0.72 on Friday, September 22 and opened higher on Monday, September 25, after the company’s new airline customer in Russia launched its maiden flight. Azimuth Airlines, a new Russian regional air carrier, is using NETE’s PayOnline service to accept payments from travellers.
For NETE, this could be the beginning of a major breakout in the stock price. In this piece, we look at the deal with Azimuth Airlines alongside a few other recent developments that we believe could impact the stock. But first, take a look at NETE’s share price action.
For readers not already familiar with NETE, here’s a little background on the company. NETE is a technology group company that provides mobile commerce and payment processing services to merchants. It focuses on the small and medium sized businesses (SMB) market. The company is headquartered in Florida, USA, but it operates worldwide. NETE’s portfolio is composed of several internet properties that enable it to provide financial technology and value-added solutions to its global customer base.
The company operates in three segments as North America Transaction Solutions, Mobile Solutions, and Online Solutions.
For its 2Q17 (June quarter), NETE posted revenue of $16.1 million, up 18% from a similar quarter last year. The topline gain was due to strong performance of North America Transaction Solutions and Online Solutions segments. North America Transaction Solutions sales rose 31% year-over-year, backed by customer growth and emphasis on value-added offering. Online Solutions sales increased 33% year-over-year.
NETE finished the quarter with more cash balance than it entered it with, while its liabilities shrank.
NETE wins Azimuth Airlines payment support business
Azimuth Airlines, a new air carrier serving Russia’s regional markets, launched its first flight on September 22 after months of preparation. The airline launched its maiden flight on an SSJ100 aircraft on the Rostov-on-Don to Moscow Vnukovo route. It was a successful launch for Azimuth as it achieved a 100% seat load factor on that first flight.
Azimuth uses NETE’s PayOnline service for an integrated payment acceptance solution through its website. In addition to seamless payment acceptance, Azimuth chose PayOnline because it offers the maximum level of protection against potential fraudulent transactions. Despite its high security feature, PayOnline still allows for a high percentage of payment approvals.
Azimuth is excited with the payment acceptance solutions it is getting from NETE. Maxim Krasnov, Head of Sales for JSC Azimuth Airlines, stated the following about using NETE’s PayOnline service.
“To facilitate the acceptance of online payments for air tickets we used the capabilities of PayOnline. As a result, the online payment process with bank cards turned out to be as friendly as possible for passengers. The payment page and the form of payment are customized in the style of our airline, the form automatically adapts to the screen size for comfortable use on mobile devices.”
Azimuth has just begun operations and it remains on expansion mode, which includes growing its fleet size. Azimuth plans to become the base airline operator of the Platov airport, which is under construction near south Russia’s largest city of Rostov-on-Don.
The deal with Azimuth highlights the business potential for NETE in the low-cost carrier (LCC) industry. On the basis of seat capacity, LCCs are gaining share of the global aviation industry. According to the International Air Transport Association (IATA), LCCs control at least 26% of the Asia-Pacific airline market, and in Southeast Asia they control 54% of the market. Globally, LCCs have 26% of the aviation market.
In the case of NETE, there are at least a few to ways to understand the impact of its deal with Azimuth. First, Azimuth is going to boost NETE’s revenues. And NETE’s revenues from Azimuth should increase as the airline expands. Second, the deal with Azimuth will bolster NETE’s credentials as a payment acceptance provider for the airline market, potentially unlocking more business opportunity for NETE in the aviation industry considering the rise of LCCs.
Improving customer retention
In a move likely to draw more customers to its platform and also boost its customer retention, NETE announced on September 18 that it was giving away free mobile POS (mPOS) to all merchants in Florida that were affected by the Hurricane Irma storm.
The storm cut off thousands of businesses in Florida from electric power, impairing their business operations. But with NETE’s Unified Payment mPOS, the affected merchants should be able to restore a critical segment of their operations, which is accepting credit card payments.
Vlad Sadovskiy, the President of Integrated Payments at NETE, said the following about the Unified Payments mPOS giveaway to Florida merchants.
“Hurricane Irma caused significant damage to thousands of businesses in Florida. We want to support all merchants affected by the storm by helping them get back to business quickly.”
On August 17, NETE said that its PayOnline subsidiary launched a payment acceptance module for several popular instant messaging apps. The payment support covers apps such as Facebook Inc (FB), Viber, Telegram and VKontakte. The move gives NETE a channel to profit from mobile app transactions, which are on the rise due to e-commerce.
In light of what we’ve just seen, the management of NETE is making the right moves to grow the company’s payments support business and to pave the way for the stock price to move higher. But for now, one major risk that hangs around NETE is that its continued listing on the Nasdaq is uncertain due to stock price and shareholder equity that are below the requirements.
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Image courtesy of Rohan Lathiya via Flickr
Disclosure: We have no position in NETE and have not been compensated for this article.