Helios And Matheson Analytics (HMNY) Stock: Why Citron Is Wrong


Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having a rough time in the market this morning, and it’s the first time in a while. In fact, the stock has been on a tear, gaining around 1,000% over the past month. However, as the market came to a close yesterday, Citron Research started to wage an attack on the stock, leading to fear among investors and causing declines in the value of the stock. As is normally the case, our partners at Trade Ideas were the first to alert us to the declines. Currently (8:33), HMNY is trading at $29.16 after a loss of $3.74 per share (11.37%) thus far today.

Citron Attacks HMNY

As mentioned above, Helios and Matheson Analytics is seeing its first decline in some time as the result of an attack waged by Citron. In a Twitter post launched late in the trading day yesterday, Citron announced that it expects the stock to fall back to $20 per share in a warning to retail investors, ultimately stating that the product it has is not worth more than a billion dollars. Here’s the Tweet that started the declines:

What Product Are They Talking About?

For those of you who haven’t been following the HMNY story, the gains that we’ve seen on the stock are largely the result of MoviePass, a product that the company acquired back in August. Shortly after acquiring the product, the company decided to greatly reduce the price in order to drive demand, cutting the price from around $40 per month to just $9.95 per month.

As a result, consumers now have the ability to go to the movie theater as much as they want to see new release movies for just $9.95 per month with nothing more than a MoviePass subscription. Of course, the reduction in price led to a massive increase in demand. After all, why wouldn’t consumers want to go to the movie theater to see new releases for around the same price of a general streaming service. So, about a month after acquiring MoviePass, the service had picked up dramatically. In fact, HMNY announced that subscribers had climbed from around 20,000 to more than 400,000 since the acquisition. That announcement was made back in mid-September. So, we could imagine that the subscriber base is a bit larger now.

Why I Believe That Citron Missed The Mark

First and foremost, I want to let you know that you won’t hear me say this often. The truth is that I enjoy analysis by Citron and the company is usually pretty accurate in their predictions. However, when it comes to Helios and Matheson Analytics, I believe that the firm missed the mark in a big way. In fact, there’s plenty of value left in HMNY in my opinion.

Much of this opinion surrounds MoviePass. First and foremost, look at the explosive growth in subscribers seen in the first month the company owned the product, and the revenue this growth has already generated. After all, 400,000 subscribers equates to initial revenue of $3,980,000. That revenue will continue to roll in month after month. So, if HMNY sees absolutely no growth out of MoviePass moving forward, but holds onto its subscribers, it will generate $47,760,000 per year from its current subscriber base.

However, it’s highly unlikely that the company wouldn’t generate growth. Considering the fact that MoviePass is now cheaper than the middle and top-tier services at Netflix, it only makes sense that even more demand is going to be driven. In fact, I’ve told a few friends about this service and most of them have already subscribed. Bringing us to the next point…

MoviePass Is Largely Unknown

Sure, MoviePass already has 400,000 subscribers that we know of and has likely grown since the release of that data. Helios and Matheson did a great job during the couple of months that it has owned the product. However, this is just the tip of the iceberg. After all, the service is a largely unknown one. Truth be told, I had absolutely no idea that MoviePass even existed until HMNY started to go on a tear as a result of sales. I’ve talked to at least 20 people about it, all of whom didn’t know the service existed, yet expressed incredible interest in the service.

Now, considering that there has been very little marketing, and that the masses simply don’t know about the service, think about what will happen when MoviePass actually gets some advertising behind it and becomes a household name like Netflix. How many consumers are actually going to turn down an offer to see unlimited new releases in theaters for less than the cost of a single movie ticket?

When the company markets the service, putting some real advertising dollars behind it, it only makes sense that subscriber numbers will fly! Considering that the service is already worth nearly $50,000,000 a year with growth that was seen in around a month, the idea that it will grow to be worth more than $1 billion once HMNY really starts to market it isn’t far-fetched at all; in fact, it’s a very realistic expectation.

Bringing The Ecosystem Back Into Play

As mentioned in previous posts about HMNY, MoviePass isn’t their only product. However, if the company plays their cards right, it could be a driving force for RedZone Maps and anything else the company comes up with. After all, we’ve seen how Apple tied its products together, creating an ecosystem that’s hard to avoid. It’s hard to discount the idea that the massively popular MoviePass could be a driver to the same type of system, where cross-selling creates opportunity after opportunity for Helios and Matheson Analytics.

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The Bottom Line

While it pains me to say this, the bottom line is that in this rare instance, I believe that Citron is wrong. The company that usually hits the nail on the head completely missed the strike with the hammer this time. At the end of the day, HMNY is likely to see explosive growth as the MoviePass product continues to grow, launching the company to the sky with the elites like Netflix, Amazon, and more. You may think “That’s a bit of a far-fetched comparison,” but just wait a year, you may be surprised at just how much this thing grows!

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