Following Helios and Matheson Analytics Inc (NASDAQ: HMNY) as of late has been a lot like following a roller coaster. While the stock is down early on in the market today, it has seen its fair share of ups as of late as well. However, when the stock falls, I’m not seeing losses. Instead, I’m seeing opportunity. We’ll get into why in a minute. Before we do, we’d like to give a big thank you to our partners at Trade Ideas for always being the first to alert us to movement in not only the value of HMNY, but just about everything we write about. At the moment (10:23), the stock is trading at $20.41 per share after a loss of $0.50 per share (2.39%) thus far today.
HMNY Has Been A Roller Coaster Ride
As mentioned above, following Helios and Matheson Analytics has been a lot like following a roller coaster as of late. The stock has seen massive gains followed by declines over the past several weeks. So, what’s the deal here?
Well, it all started with the acquisition of a majority stake in a product known as MoviePass. The product is essentially an unlimited movie ticket. Consumers purchase the service, and once they do, they can go to the movie theater as much as they want for one low monthly fee.
That monthly fee used to be around $40. However, shortly after acquiring the majority stake in the service, HMNY reduced the monthly fee for MoviePass to just $9.95. This massive reduction in price led to a massive flood of demand. In fact, in mid-September, the company announced that its subscribers had grown from around 20,000 to more than 400,000. Of course, this led to massive gains in the value of the stock.
Cue The Roadblock!
After HMNY flew by around 1,000%, Citron, a firm famous for releasing negative reports and shorting the stocks they release the reports about, attacked the company. Essentially, Citron said that MoviePass wasn’t a product that’s worth more than $1 billion and that it’s likely to lose money for Helios and Matheson Analytics.
Of course, this sent the stock tumbling downward, as investors feared that Citron was correct. For several days, HMNY found itself in the red. In fact, the declines on the first full day following the Citron report hit around 30%…. can someone say OUCH?
I Believe That Citron Was Very, Very Wrong!
At the end of the day, it’s important that investors know what Citron is. The company focuses on shorting stocks. This means that when they wrote the negative note about HMNY, they had a short position on the stock. For those of you who don’t know, that means that Citron essentially made money when they pushed the value of Helios and Matheson down. Therefore, the company had a vested interest in driving the stock to losses.
Before we get any further here, I’d like to make one thing clear. I do not have a position in HMNY. In fact, I never have any positions in anything I write about because I don’t want the content on my website to be biased. Also, I have not been paid a dime by Helios and Matheson. While I would love to be paid to cover such an incredible story, that’s not the case here. All the money from articles on this topic comes from my generous advertisers. With that said, I have absolutely no vested interest in HMNY. Regardless of whether the stock climbs or falls, I make the same amount of money when I write about it, and it’s not out of the company’s checkbook.
With that said, I believe that Citron was very wrong. In fact, it’s my belief that MoviePass will likely prove to be the goose that lays the golden eggs for the company. Here’s how I see it…
The Value Of MoviePass
First and foremost, just based on the monthly subscription fee alone for MoviePass, it’s clear that the product is overwhelmingly valuable. Doing the math on the 400,000 subscribers we already know that HMNY has built tells us that the product is already generating $3,980,000 per month. Considering the data that we do have, subscribers have grown by a multiple of 20 in a single month. If that growth rate has continued, the service likely has 8 million users at the moment, bringing in revenue in the amount of $79,600,000 per month.
Now, don’t get me wrong; the reality is that HMNY didn’t likely bring in 7.6 million users over the past month. However, it wouldn’t be a far stretch to say that the company did drive around half a million new users over the past month. If that’s the case, revenue generation from the $9.95 monthly fee would come in at $8,955,000 per month, and that revenue would likely continue to grow. So, MoviePass is definitely a strong revenue generator.
Now, what about profits? Citron seems to think that the company isn’t making a penny of profit per user at the price of $9.95 per month. While I highly doubt that this is the case, let’s pretend for a moment that it is. Let’s pretend that HMNY decided to charge consumers exactly what it pays to allow them to go to the movies on an unlimited basis. Where’s the value?
Well, the value is in the data. The reality is that one of the most valuable assets on the planet at the moment is data. In fact, the big data industry was worth about $125 billion in the year 2015, and that number has likely grown since. So, let’s pretend for a moment that Helios and Matheson makes absolutely nothing off of the monthly fee. What they do have is data on hundreds of thousands and possibly more than a million consumers already. They know what kinds of movies they like due to the use of MoviePass among other data. Perhaps more importantly, they have said that they plan on selling this data to companies like Uber, restaurants, and more! While Citron has undermined the value of the monthly fee associated with MoviePass, it’s impossible to undermine the value of data. At the end of the day, big data is big money, and HMNY has the ability to generate a massive amount of it thanks to MoviePass.
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The Bottom Line
The bottom line here is a relatively simple one. At the end of the day, HMNY has found a goldmine with MoviePass, regardless of what Citron and others with a short-side interest in the stock may believe. Even if the company makes absolutely no money from the monthly fee, which I don’t believe is the case, there is money to be made in the data, and a lot of it. Nonetheless, we’ll continue following the story and bringing the news, and the data, to you as it breaks!
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