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Julie Lamb, Senior Editor

About the Author Julie Lamb, Senior Editor

Julie joined Smarter Analyst across the world- all the way from Louisville, Kentucky- where she graduated with a Bachelor of Arts in English with a focus on creative writing from the University of Louisville.

Helios and Matheson (HMNY): Is the Risk/Reward Here Compelling After All?


Is there a bullish case to be made for Helios and Matheson (NASDAQ:HMNY) stock? Worthy of note, this once shining tech play has taken a sharp nosedive since the beginning of May- plummeting nearly 82% in the blink of a month.

The company’s majority owned subsidiary movie-ticket subscription platform MoviePass seemingly overnight had the Street turning sour on fears of cash burn and sustainability. Yet, this challenged stock has one blogger maintaining bullish conviction despite the rising shout of bears on the Street finding it smartest to run for the hills.

Seeking Alpha blogger Wario Investments argues that a bull case can absolutely be made, asserting: “a buying opportunity exists for this beaten-down stock. The company’s disruptive business model cannot be ignored, and will likely shape the future of the movie industry. The overall risk/reward profile makes this an interesting buy.”

It is not that the blogger is blind to the risk factor an investor must embrace to bet on HMHY, as he admits, “To be fair, the risks are definitely there – the main one being cash flow.” This all spirals back to the disclosure that turned HMNY from promising tech bet to falling knife: the HMNY team revealed an estimated $43 billion on its balance deck coupled with an additional $24 million in receivables. The problem? HMNY is burning through more than $21 million each month.

Meanwhile, HMNY has indicated access to beyond $300 million in capital markets, but as Wario Investments understands, “that money may or may not be there when it is needed.” Though the bull sees a case for investing in HMNY all the same, the risks that linger are nonetheless worth recognizing.

Another peg in the bearish case: HMNY stock presently does not achieve Nasdaq’s listing standards calling for a stock price of a minimum of $1 with a $50 million market cap. For context, today the stock rests at a faint $0.38. If this tech stock continues to hover underneath these standards for 30 days, the company has odds to be hit with a warning letter, where there will be a six-month deadline to fulfill the standards. With such blatant cash flow challenges, can HMNY pull off a comeback in the nick of time?

In the bigger picture, Wario Investments pinpoints four key reasons investors should remain patient with HMNY’s prospective rebound. First, the blogger notes MoviePass’ new ownership in American Animals, where those resources were utilized to realize around $35,000 per theater to the table across four theaters its opening weekend. The blogger explains, “While that number sounds tiny, it does show that the value add is there. MoviePass has demonstrated its ability to influence box office sales, and can even determine whether a movie will succeed or fail. This is a huge opportunity for movie producers and advertisers, and you can bet they are all paying attention.”

Meanwhile, Wario Investments sees an opportunity that is ” not too big to fail – yet.” MoviePass boasts a forecasted 3 million plus subscribers to its base, and this momentum is still kicking. The rumor mill churns of the notion that MoviePass has its hooks into around 2% of box office sales for major films, and the blogger notes that this number climbs meaningfully more in terms of smaller and independent films.

Though movie chain giants of the likes of AMC have made it clear of their aversion to the MoviePass platform, Wario Investments wagers the service could before long grow just “too big” to be ignored. Moreover, with monster chains up until now balking at revenue sharing negotiation, the blogger anticipates it is “only a matter of time before they are forced to.”

Wario Investments writes, “HMNY does not need to take drastic steps such as cutting out movie theaters; all they need to do is take small steps to nudge their large user base (for example, give away a free small popcorn at a preferred theater) and these large chains will be hurting.”

Third, the blogger notes a new business model coming into play, where MoviePass has the opportunity to evolve the manner in which theatergoers muse about attending movies, thanks to its subscription model. It was just five years ago when movie tickets came at such a steep cost that the average American was only venturing to the theater roughly five times that year- and the blogger sees odds for that number to wane further.

The value opportunity presented with MoviePass boils down to its capacity to substantially drive up the numbers of movies people are seeing. In other words, Wario Investments sizes up greater screen time to ads to concession sales to business for restaurants on the periphery to an ultimate bigger piece of total spending. Additionally, the surge of MoviePass’ model translates to movie producers not under pressure to spin out “hits” just to turn over profits. Content can be developed on less expenses thanks to consumers with more eagerness to see the films. For this reason, MoviePass has often been compared to Netflix, another affordable service that creates content that has less quality but continues to bring value to its subscription base. However, leading networks continue to hinge upon ratings as well as ad revenues for success.

Ultimately, “success” is possible for HMNY, despite its recent beleaguered performance, as the blogger spots a tech player progressing forward, as long as financing down the line can be secured. If so, consider a road to profitability a genuine option for HMNY, wagers Wario Investments. Consider HMNY’s recent takeover of EFO Films as an extra source for revenue as HMNY endeavors to master its platform’s power to impact sales. Wario Investments finds most analysts are keyed into the steep expenses it takes to both produce as well as market a film- a range that circles a whopping $100 million. That said, MoviePass does not fall under this umbrella, considering its standout subscription model as well as its capacity to shape a large portion of the population, continues the blogger. The tech player likewise is intent on boosting revenues streams via fringe services.

Should HMNY keep up its execution and finance management, its opportunity to still succeed in the market is not as much of a pipe dream as certain bears might argue, underscores Wario Investments. The blogger concludes calculating a risk/return profile here comparable to venture capital. If HMNY is capable of doubling its revenues over the upcoming year, as the tech player anticipates reaching 5 million subscribers by next year, and approaches profitability, Wario Investments wagers a mid-term price target between $1 and $3 to be reasonable.

Analyst Ratings

TipRanks exhibits bullish backing for this tech player, with all 3 analysts polled in the last 12 months rating a Buy on HMNY. Notably, the 12-month average price target towers at $13.33, marking a colossal almost 3,408% upside from current levels.