Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having a relatively strong start to the trading session in the pre-market hours this morning. However, the company hasn’t released any news that would cause such gains. So, what’s the big deal? Well, it seems as though after the massive declines seen on the stock last week, investors are seeing the stock as being at the bottom and working to get in at a discount. Nonetheless, I’m here to tell you that this is no discount, and any gains we see on HMNY today or in the near term are likely to disappear quickly!
Breaking Down The Real Issue At HMNY
Helios and Matheson hit the center stage with the acquisition of a majority stake of MoviePass late last year. After acquiring the service that seemed to have a sustainable system going, the company wanted to see strong growth. So, they threw sustainability to the wind. Knowing that it would likely create losses in the beginning, HMNY greatly reduced the price of the $50 MoviePass service to only $9.95. From there, consumers could go to theaters and see whatever they wanted whenever they wanted for a low monthly price. So, subscribers grew off the charts!
The only problem here is that, in creating popularity, HMNY threw profitability to the wind. Sure, the company quickly grew to more than 2 million subscribers and is on track to have more than 5 million by the end of the year. However, when each one of those subscribers is generating a loss, well, it’s not all that impressive anymore. After all, any company could gain subscribers in a big way by offering them a too-good-to-be-true proposition.
Unfortunate, HMNY pays full price for movie tickets used by its subscribers. So, each time a subscriber visits a movie theater, the company is losing money. The goal was to offset this cost through concession sales, marketing initiatives, and data sales, but that’s a process that will take nearly forever to put together. So, offsetting the cost before going bankrupt is going to be difficult, if not impossible.
The Company Has Tried To Fix The Problem And Failed Miserably
Recently, Helios and Matheson decided that they were going to try and stop the bleeding by imposing limits. Instead of allowing subscribers to go to the movie theater on an unlimited basis, the company tried to limit its subscribers to four viewings a month. Sure, they would still lose money, but it would cut off the bleeding at some point. Nonetheless, this didn’t work either. After giving consumers what they wanted, HMNY essentially took features away, and it led to quite a bit of backlash. So, the company quickly diverted to the old plan, digging a deeper and deeper hole to throw what little money they have left into.
What We’re Seeing From The Stock Today
Today is proving to be a good day for Helios and Matheson Analytics as the stock bounces off of lows. While there has been no news, indicators are leading to excitement that the stock “can only go up from here.” As some get involved, others are seeing gains and doing the same, only pushing the stock up. However, these types of gains tend to be very short-term. So, if you’re going to make a move here, be careful. Nonetheless, our partners at Trade Ideas were the first to alert us to the gains. Currently (8:08), HMNY is trading at $0.74 per share after a gain of $0.089 per share (13.65%) thus far today.
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While HMNY is making a run for the top today, we’ve seen runs in value as excited investors take hold of the stock in the past. However, the unsustainable business model under which Helios and Matheson Analytics is operating MoviePass is going to be the driving force that pushes the stock to zero. So, if you think you’re getting a discount, I’m sorry to be the one to inform you, but you aren’t. Anything over free for a share of HMNY will likely lead to losses in the long run! Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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