With Monitise’s (LSE: MONI) shares down nearly 60% year to date, even some of the company’s most committed investors could be starting to question the group’s prospects.
But this performance is not as bad as it looks. Indeed, year to date the wider FTSE AIM UK 50 Index has fallen around 25%. So at least some of Monitise’s recent declines can be traced to wider market weakness.
However, Monitise is still a start-up business and has a long way to go before it can claim to have hit the big time. That’s why shareholders should view the company as a long-term, buy and hold investment.
Actually, on this basis, over the long term Monitise has really outperformed. During the past five years the company’s shares have risen 108%, compared to the FTSE AIM UK 50 Index which has only clocked up a return of 26%.
No easy task
Monitise is trying to take on the world and this will take time. The creation of a global payments network is not something that can be done overnight, or even over several years. For example, it took Visa two decades to become an international payments processor, even with the financial backing of the Bank of America behind it.
What’s more, up until 2007 Visa continued to operate as a series of entities owned regionally by banks across the world. The company only became the Visa we know today after a merger during 2008.
From its roots, which can be traced back to 1958, to the company’s 2008 initial public offering, it took Visa five decades to achieve global success. This 50-year transformation really shows how hard it is to develop a truly global network and it makes Monitise’s short life span look insignificant.
Investment required
When Visa began to develop its global payments network, the company had almost no competitors. Unfortunately, the same cannot be said for Monitise as there are now hundreds, if not thousands of ways to send money around the world both on and offline, making it harder for the company to break into the market.
Nevertheless, the company has made significant progress disrupting competitors by signing agreements with several major banks, retailers and even IBM: partnerships that will prove invaluable to the company over time.
Further, these partnerships prove to both current and prospective partners that the company has something to offer. While Monitise’s business may be slow at present, the company’s customer base is growing and with over 30m users at present, the company must be doing something right.
The bottom line
So overall, Monitise’s shares may have had a bad year so far but investors should not turn their backs on the company just yet.