Over the last year, Net Element International Inc (NASDAQ:NETE)’s share price has traded at highs of over $10, then fallen lower than $3, a move which could by then have easily been mistaken for correction or reversal until now.
The company, however, has seen its fortunes turnaround and hit highs of just over $33 on Thursday, before settling at $18.75 a share.
The above share trend can be seen in the chart below:
With the sudden increase in their valuation postulating an increase in the company’s expected future incomes, we decided to take a closer look at NETE and establish what exactly is their value-driving plan and the activities that will be undertaken to ensure their plans come to fruition.
This piece seeks to explore the feasibility of investing in NETE.
Before going deeper into the analysis, however, let us have a brief look at the history of NETE.
Net Element Inc was formed in 2004 with its headquarters being in Miami, Florida. It is a global financial technology and value-added solutions group specializing in mobile payments and other transactional services in emerging countries and in the United States.
The company focuses on the small and medium-sized businesses (SMB) market and currently operates in three segments: North America Transaction Solutions, Mobile Solutions, and Online Solutions. They currently have over 96 employees.
The Crypto Deal
NETE has done it again with one of the largest deals in the market.
The company has opted to venture into the cryptocurrency space with a deal that is meant to land them in the future of the financial ledger system.
The company has partnered with financial firm Bunker Capital to build a new blockchain-based unit. This unit will be responsible for the development and commercialization of their blockchain technologies: technologies which they expect to get to the market as soon as possible.
This partnership is expected to have significant benefits for both entities based on the description of the management at Bunker Capital on their vision for the system. The company described its view on the platform’s outlook as ‘…become a decentralized crypto-based ecosystem that will act as a framework for an unlimited number of value-added services.’
The two companies plan to use this platform to come up with a platform that connects merchants and consumers directly using blockchain technology. The technology will ensure that their transactions are efficient and are well accounted for in the ‘public ledger’. The two will work hand in hand to ensure that the technology is deployed and commercialized long into the future. Furthermore, the two plan to work together to come up with systems that will disrupt and decentralize payment systems globally.
The above will ensure that they benefit from the new and ever-growing space, a space that seems to be rewarding them quite significantly even now. With the cryptocurrency market growing at record numbers and the continued acceptability of blockchain as the technology that has revolutionized payments, NETE seems to have set itself into the right space and it will not be long before the company’s venture pays off.
Results from the third quarter of business have sent mixed signals to the market courtesy of the varying performance as will be seen below.
Despite their revenues going by 14% up from $12.8 million to $14.9 million based on a year-on-year analysis, the current revenue position was a drop of nearly 8% from $16.1 million in the second quarter. Management attributed this to the hurricanes which disrupted their operations during the period of its occurrence. Moreover, the reduction in sales and administrative expenses by over $200,000 did little to ensure their loss position wasn’t further aggravated as they went further to make a loss of $1.7 million, up from $1.6 million in the previous quarter.
However, it’s not all doom for NETE as the company finally turned a positive operating cash flow.
During the current period, they made about $94,000 in operating cash flows. Moreover, they spent nearly $1.4 million in acquisitions, a move which speaks to their futuristic outlook as well as the management’s belief in the consolidation of their industry as well as alluding to their need to diversify.
Although the above doesn’t all tell of success, it is important to appreciate that NETE is working towards growth and has made significant strides on this path. Despite the fact that a lot needs to be done especially in cementing its revenue base, the company seems to be working diligently in doing so.
In conclusion, NETE is a company on the growth path. It has made significant strides to ensure they are the go-to company on electronic payments and this seems to be working well for them. Going forward, NETE is expected to create value for its shareholders, eventually translating to a higher share price.
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Disclosure: We have no position in NETE and have not been compensated for this article.