I am still bullish on Blinkx (LSE: BLNX), but I am not sure why anybody would invest a large chunk of their savings in Monitise (LSE: MONI) and Quindell (LSE: QPP) at their current prices.
Of course, Blinkx and Monitise remain opportunistic trades, while Quindell could be worth more than 133p . Here’s why.
Blinkx: 100% Upside
Trading multiples suggest that Blinkx is a bargain at 30p a share, where its stock currently trades. Its net cash position is under pressure but remains solid in the light of short-term financing needs — the problem, though, is falling profitability and declining revenues.
Its fortunes hinge on strategy: Blinkx is acquiring assets, as it emerged this week when it snapped up All Media Network, and has been actively looking for new partnerships. You may not trust my judgment and consider its M&A activity too risky, but I would bet on a price target of 60p a share — for a full 100% upside from its current level.
As it moves away from desktop and into advertising for mobile — the fastest-growing segment in the advertising space — Blinkx could surprise a few investors and Harvard pundits in the next few quarters, particularly if it finds a way to finance acquisitions by using its own stock. That would give it credibility.
Of course, I would hold Blinkx only as part of a diversified portfolio.
Monitise: More Downside Than Upside
I really struggle to find merits in the investment case, and that’s not only because I don’t believe Monitise has a truly unique selling point in the mobile-wallet market — but mainly because its financial position isn’t strong enough to compete with rivals that have huge resources and can commit big investment in a very competitive sector, where costly know-how determines losers and winners.
With Monitise, it’s a balancing act perhaps.
On the one hand, economic losses are building up, and it may come a point when the company will ask for the backing of shareholders — so you’d be faced with the real risk of dilution if you invest in it.
On the other, the cheaper its equity gets, the more likely it becomes a takeover target for such a suitor such as VISA , which may offer 20p to 25p a share, for an implied premium of up to 80% to its current valuation of 14p.
That’s mere speculation, however, and Monitise seems more likely to press ahead on its own than with a strategic partner.
Quindell: Time To Hold Tight?
This is a very simple investment case now: if Quindell, which trades at 133p a share, successfully wraps the sale of its professional services division to Australian law firm Slater & Gordon by May, its shares could easily rise some 20p or so to 155p/160p.
In fairness, any possible upside also depends on whether Quindell will stick with its original plan, according to which it would distribute up to £500m to shareholders once the sale is executed — £500m, or 125p a share, is in line with Quindell’s current value.
Where the stock will go from here is hard to say. Surely, Quindell has a business plan for the reminder of its assets portfolio, but for the time being the plan it presented to its shareholders is not good enough to deserve my attention.