For much of its lifetime as a public company, the stock chart of IT consulting solutions firm Helios and Matheson Analytics Inc (NASDAQ:HMNY) resembled nothing so much as the bottom of Death Valley — long, flat, and mostly red.
That all changed this past summer, when Helios and Matheson entered into an agreement to take majority control over a new subsidiary, MoviePass — at about the same time as MoviePass began disrupting the movie-house industry with offers of a monthly subscription to see all-you-can-eat cinema for a very reasonable subscription fee. In years past, MoviePass had offered tiered subscriptions to its subscribers, with rates as high as $50 a month. In August, however, MoviePass made a dramatic price cut — slashing monthly subscriptions to just $9.95 per month (and then following that up with a year-long plan averaging closer to $7 a month).
It almost goes without saying that a development this dramatic threatens to shake up the movie business, and on Monday evening, we saw clear evidence of this: Responding to the threat from MoviePass, cinema chain Cinemark (NYSE:CNK) announced a subscription plan of its own — sending Helios and Matheson Analytics stock plummeting more than 20% over the next trading day.
Maxim analyst Brian Kinstlinger thinks this offers investors an opportunity to buy Helios stock on the cheap.
Kinstlinger argues that although $0.96 cheaper a month than MoviePass’s marquee offer, Cinemark’s offer of a $8.99 subscription plan is unlikely to gain traction. For one thing, Cinemark’s plan entitles viewers to see only one movie per month, versus MoviePass’s all-you-can-eat subscription. For another, Cinemark’s plan “locks in” customers to seeing their movies at Cinemark theaters — regardless of whether those theaters carry the movies viewers want to see, or are located as conveniently as other cinemas.
Simply put, Kinstlinger says that “MoviePass’ $9.95 per month subscription is for unlimited movies to almost any theater; a much better value, in our view” — and Kinstlinger is right. It is a better value.
But is Helios and Matheson stock a good value for investors? Is Helios, as Kinstlinger argues, a “buy” and a stock likely to more than double in value over the next 12 months (to a price target of $25 a share)? That’s a much harder argument to make.
Based on trailing-12-month results, Helios is both unprofitable (having booked losses in excess of $61 million) and cash-burning (nearly $10 million in cash consumed). Revenues at the company have been trending downwards for years, recently hitting just $4.8 million in sales booked over the past 12 months.
Granted, all these numbers relate to Helios and Matheson sans MoviePass. Things may change pretty significantly once MoviePass starts making an impact on Helios’ income statement. Until we see a few post-acquisition financial reports, however, it’s hard to say whether MoviePass will help, or hurt Helios and Matheson. Until we do see those reports, Kinstlinger’s endorsement is premature.