Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having yet another strong start to the trading session in the pre-market hours following the news released by the company yesterday. With a new plan to keep its audience happy while reducing costs, HMNY is catching the attention of investors yet again. Nonetheless, you shouldn’t be fooled. The reality is that the stock is still likely to head to zero. Today, we’ll talk about:
- The announcement;
- why this isn’t going to save HMNY;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
HMNY Announces Plans To Cut Costs
As mentioned above, Helios and Matheson Analytics had a strong run in the market yesterday followed by decent gains in the pre-market this morning. The gains are ultimately the result of the company’s announcement that it would be limiting use of the MoviePass service while maintaining the $9.95 price point.
Starting on August 15th, MoviePass subscribers will start to see limitations, only allowing them to see 3 films per month. This includes new releases and suspends peak pricing and ticket verification, introducing boundaries to help ensure what HMNY says is long-term stability. In the release, the company said that the changes are geared at catering toward the bulk of their subscribers who use the service to view 3 movies or less per month. In a statement, Ted Farnsworth, Chairman and CEO at HMNY, had the following to offer:
All along, we’ve known that we need to invest heavily to prove our business model and bring enough subscribers into the business to truly understand their usage patterns and allow us to leverage ancillary revenue opportunities… However, one year and 3 million plus members later, it has become clear that a small number — only 15 percent — of the subscriber base has been stressing the system. We believe this new business model will immediately reduce our burn so we can refocus our efforts where they belong: making a permanent and positive change in this industry by creating an amazing theater-going experience and building a company that continues to benefit our nationwide community.
Why This Won’t Save HMNY
At the end of the day, it all boils down to math. At 3 movies per month, considering the national average cost of a movie ticket, each subscriber will cost Helios and Matheson Analytics about $26.91 each month. Considering subscription and non-subscription revenue, the company brings in $11.95 per month per subscriber ($9.95 subscription fee plus $2 per month in non-subscription revenue). So, subscribers that use the service to its full capabilities will be costing the company nearly $15 per month. Even if consumers only see 2 movies per month, they generate a loss for the company of around $6 per month. Even that small number, when multipled by 3 million subscribers, is a massive burden. As a result, we don’t believe that the update will save the comapny. Instead, it will only take longer for the business to fall apart.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news leads to moves. Considering the cost-cutting announcement made yesterday, excited investors pushed the stock up more than 19% and continue to push it up int he pre-market hours this morning as excitement builds. Of course, our partners at Trade Ideas were the first to alert us to the gains. Currently (7:45), HMNY is trading at $0.094 per share after a gain of $0.011 per share or 12.83% thus far today.
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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 comapny’s continued work to bring MoviePass to a profit. While we don’t believe that this will ever take place, it’s a fun story to watch. Nonetheless, we’ll continue to follow the news closely and bring it to you as it breaks!
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