UPDATE 10:09: News just broke that the gains aren’t just the result of traders trading. In fact, Citadel Securities disclosed a 5.4% stake in the company. While this may be exciting to some, we believe that Citadel is making a huge mistake and our view of the company is not changing as a result of the news. Please read below to see why we believe HMNY is going to ZERO!
Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having an overwhelmingly strong start to the trading session this morning. However, once again, we are seeing moves with absolutely no news. So, what’s causing the gains? Today, we’ll talk about:
- Why HMNY is headed up;
- what we’re seeing from the stock;
- why you shouldn’t let these gains lure you in; and
- what we’ll be watching for ahead.
Why HMNY Is Headed Up
As mentioned above, Helios and Matheson Analytics is having an incredibly strong start to the day in the pre-market hours this morning with gains well over 5%. So, what’s the deal? The company has released no news. What’s going on? The answer is simple. Essentially, the movement on the stock is the result of traders trading.
Last week, the stock saw massive declines as more and more investors lost faith in the idea that HMNY will ever be able to turn MoviePass into a profitable product. Nonetheless, after the dramatic declines that we’ve seen as of late, some traders seem to think that the stock is bottoming out, presenting an opportunity for growth ahead. So, we’re seeing some buying. However, that doesn’t make HMNY a good investment choice. We’ll tell you about why in a moment.
What We’re Seeing From The Stock
With traders seeing support for price growth, it only makes sense that they are pushing Helios and Matheson Analytics toward the top in the market today. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (7:40), HMNY is trading at $0.44 per share after a gain of $0.032 per share (7.98%) thus far today.
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Why You Shouldn’t Let The Gains Fool You
When we get into the market, the ultimate goal is to generate a profit. So, when we see a stock running for the top with gains of more than 5%, it may be hard to look in the other direction. However, when it comes to HMNY, that’s exactly what we believe should be done. At the end of the day, while the stock is seeing gains this morning, we don’t believe that these gains are likely to continue for very long, nor is the company likely to hold onto the gains.
At the end of the day, Helios and Matheson Analytics is a company with a great product. However, the price point and fundamental structure of the product will essentially make it impossible for the company to generate a profit. The reality is that HMNY has been the center of attention since the company acquired the majority stake in MoviePass last year, reducing the price for subscriptions and seeing massive growth in subscribers as a result.
Nonetheless, it’s important to note that MoviePass pays the full price of movie tickets when their subscribers use the service. With a price of $9.95 per month, the average user would only have to go to the movie theater twice in any given month in order to generate a loss for MoviePass. When MoviePass can’t cover these losses, HMNY steps in and plays superhero, purchasing a larger stake in the service in the process and bailing out its flagship product.
The problem is that this can’t be done forever. In fact, at the end of the last quarter, Helios and Matheson Analytics only had about $15 million in cash on hand. While that may sound like a lot of money, it’s really pennies when it comes to a company that’s burning through about $22 million a month!
Here’s the bottom line: HMNY has a great product. However, with an incredibly low price point, every time the subscriber base grows, we see growing losses. That’s never a good thing for any publicly traded company.
What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on HMNY. In particular, we’re interested in following the story surrounding the company’s goal of turning MoviePass into a profitable venture. While we believe that the company’s efforts are futile and that profits are a long way off if they ever get here, it will be interesting to see the next steps the company takes as it continues to go broke!
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