Helios And Matheson Analytics (HMNY) Stock: Declines Continue, Opportunity Grows


Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having a rough day in the market today yet again. This follows yesterday’s news that the company has seen exceptional growth in MoviePass subscribers. So, what is it that’s causing the stock to fall amid positive subscriber growth? Are investors getting it wrong here? And what should we be watching for ahead? We’ll get to all of that in a minute. However, before we do, we’d like to thank our partners at Trade Ideas for being the first to alert us to the declines. Currently (10:24), HMNY is trading at $11.70 per share after a loss of $0.75 per share (6.00%) thus far today.

HMNY Sees Massive Growth On MoviePass Yet Again

As mentioned above, Helios and Matheson Analytics announced yesterday that it has seen massive growth in MoviePass subscribers yet again. It all started in mid-August when the company announced that it had acquired a majority stake in MoviePass, a product that gives consumers unlimited access to the movie theater for one monthly fee.

When HMNY acquired the majority stake in MoviePass, the service had a price of approximately $40 per month. However, shortly after the announcement that the company had acquired the majority stake, the price of the service was reduced dramatically. In fact, the service price dropped to $9.95 per month. So, for around the cost of a single movie ticket per month, consumers could go to the movie theater on an unlimited basis.

About a month after the acquisition, HMNY announced that the number of MoviePass subscribers had grown dramatically. In fact, when the product was acquired, it only had about 20,000 subscribers. However, within a month, that subscriber base had grown to more than 400,000. Then, yesterday, Helios and Matheson Analytics announced that it had reached more than 600,000 subscribers.

Why The Stock Is Falling Considering The Good News

At first glance, an increase of around 33% in the subscriber base for MoviePass seems like a great thing. So, why is it that the stock is falling considering this news? Well, it has quite a bit to do with the structure of the MoviePass service. More specifically, it’s the cost to the company.

You see, when a MoviePass subscriber goes to the movie theater using their subscription, HMNY pays full price for the movie ticket. As a result, if a subscriber visits the movie theater 2 or more times per month, the service generates a loss when compared to the monthly fee that the consumer pays.

Ultimately, several key figures on Wall Street have questioned the ability for HMNY to turn MoviePass into a profitable service. The flurry of skepticism started with a report from Citron that essentially explained that selling a dollar for ninety cents was a bad business move. As a result, as MoviePass grows, losses have the potential to grow as well, leading to fear among investors.

Is Wall Street Getting It Right Here?

The big question here is whether or not Wall Street is getting things right with regard to Helios and Matheson Analytics. Of course, if we take everything at face value, it seems as though MoviePass is going to do nothing more than generate a loss. However, when we dig into the details, there is indeed an opportunity for a profit. Here’s how I see it…

First and foremost, looking at national statistics, it’s possible that a profit is being generated from the $9.95 monthly fee on most subscribers. You see, most people simply don’t go to the movie theater often. In fact, over 80% of consumers don’t even go once per month. Considering this, on the subscribers that do not use the service at least once per month, HMNY is making a large profit margin. While this profit is likely eaten away by those that do use the service more frequently, what we’re looking at here is more likely to be a wash than a loss.

Then, we have the opportunity to enter into the realm of profit. You see, if the subscriber fee is a wash, anything that comes following the monthly fee is a profit, and HMNY definitely has plans to generate a profit. In particular, the company has been clear about the fact that it plans to sell the data it generates through MoviePass to companies like Uber, movie producers, restaurants, and more. Big data is big business, and if Helios and Matheson leverages its assets correctly here, MoviePass data could prove to be massively profitable.

Then, taking things one step further, every time I talk about HMNY, I talk about the potential ecosystem the company has the ability to create here. With the attention of the masses, the company now has the ability to cross-sell its other service, RedZone Maps, to MoviePass subscribers. As the company continues to grow and increase its amount of offerings, this cross-selling opportunity only becomes larger.

Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!

So, Did Wall Street Get It Right Here?

In my opinion, the answer is no. You see, in general, people like to take things at face value. After all, we only know what we know, and pretending to know what’s going to come in the future just doesn’t work for us. So, we tend to only look at the surface, and that’s the issue here. It’s hard to deny that MoviePass isn’t likely to be profitable when only looking at the surface. However, when you dig beneath the surface, it becomes clear that the profit potential here is actually pretty massive!

Never Miss The News Again

Do you want real-time, actionable news delivered to your inbox? Join the CNA Finance mailing list below!

Subscribe Today!

* indicates required


Please enter your comment!
Please enter your name here