In a very upbeat and promising report, analyst Austin Moldow of Canaccord explains why he is initiating coverage on shares of Helios and Matheson Analytics Inc (NASDAQ:HMNY) with a Buy rating and a $15 price target. The analyst believes that the company’s majority-owned MoviePass provides a growth vector for a challenged theatre sector. Or in other words, “MoviePass is an agent for growth in an otherwise challenged industry.” (To watch Moldow’s track record, click here)
In reaction, Helios and Matheson shares jumped nearly 9% to $4.90, as of this writing.
Moldow wrote, “We view movie theatre seats like airline seats or hotel rooms, with a near-zero marginal cost to filling one but a big revenue miss if left empty. However, we estimate that only 15% of theatre seats in the U.S. are filled each year. Similar to the online travel agencies, the MoviePass unlimited subscription product provides a mechanism for aggregating demand and creating a new profit pool to share with exhibitors. We expect continued rapid growth, with MoviePass having attracted 2M subs in just 6 months since relaunch and our forecast calling for 12M subs by 2022. With this audience level, we believe MP should evolve to yield considerable bargaining power, which should drive costs low enough to help flip the currently negative gross margin profile.”
In addition, the analyst recognizes the risk factors facing HMNY:
- The business model right now exhibits a significantly negative gross margin. We believe it will turn significantly positive over time, but strong execution is required.
- We believe management’s top priority is subscriber growth, and this may lead to delayed margin expansion and possibly more capital raises relative to our current forecast.
Aside from this rating, HMNY has only received one other analyst rating in the last three months. Maxim analyst Brian Kinstlinger has a bullish Buy rating on HMNY with a relatively bullish $25 price target, which implies a potential upside of over 400% from current levels.