Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having a rough start to the trading session in the market this morning. After a strong end of the week last week, the stock is trading well into the red this morning. As a result, many are asking whether or not this dip is one worth buying. Today, we’ll talk about the potential risks and potential rewards associated with HMNY to help you make a decision with regard to whether or not now is the time to buy.
The Risks Associated With HMNY
Helios and Matheson Analytics is a data-driven company. While their product for the longest time has been a product known as RedZone Maps, more recently, the story has surrounded MoviePass, a product that the company acquired a majority interest in back in August.
However, MoviePass is where the risk is largely coming from these days. You see, MoviePass is a movie theater subscription service that allows subscribers to go to the movie theater on an unlimited basis for a very small fee. In fact, that fee is only $9.99 per month.
The issue is that HMNY is generally paying full price for movie tickets used by its subscribers under the service. Ultimately, this means that just about every subscriber that visits the movie theater more than once per month under the MoviePass service is generating a loss for the company.
At the end of the day, the big risk is the success of MoviePass. While subscribers are growing at a rapid rate, the bears argue that the risk associated with those that use the service multiple times in the month is growing as well. Unfortunately, many believe that with a massively fast rate of growth and a high potential for loss per subscriber, HMNY only has the potential to lose money on the product.
The Potential Reward
As investors and traders, we know that where there is a potential risk, there is a potential reward, and this is definitely the case when it comes to HMNY. While there is risk in the fact that the company is paying full price for movie tickets, that risk is largely reduced by a few factors:
- How Often Do You Go To The Movie Theater?: One of the big arguments here is that only a very small percentage of the population actually visits the movie theater once per month, and an even smaller percentage visit more than once per month. While there is a chance that an unlimited subscription could change these numbers, the consumer trends show that, at least at the moment, there’s not much of an issue with subscribers overusing these types of subscriptions.
- Revenue In Marketing: Ultimately, Helios and Matheson Analytics is a data-driven company. So, you better believe that they are compiling data from every single subscriber on the MoviePass service. With this data, the company can do many things. One of the first things that they have done with it is to launch a marketing campaign for a specific movie title. Using the data from its subscribers, chances are that this marketing campaign will perform overwhelmingly well. So, we can expect to see more revenue from the marketing side of the coin down the road.
- Selling Data: The reality is that HMNY isn’t the only company that’s hungry for data. In fact, we live in a data driven world today, and the leadership at Helios and Matheson Analytics knows it. In fact, they have already said that they plan to sell the data they compile. This could be a huge source of revenue down the road.
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Is It A Good Idea To Buy The Dip?
At the end of the day, the answer to that question is one that only you can provide. After all, only you know your goals, comfort level with risk, and other unique information with regard to the way that you trade and/or invest. Nonetheless, I can say that if I was to choose a side, it would be the side of investing in the company. The reality is that while there are naysayers out there, I believe that with such rapid growth of MoviePass, the statistics surrounding how often consumers go to the Movie Theater, the company’s movements into marketing, and the overwhelmingly high value of data, the reward could easily outweigh the risk.
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