Mobile money company Monitise (LSE: MONI) has jumped 20% in early trading today, although there’s little in the way of news to validate this bounce. However, today’s bounce brings to an end weeks of dismal price action, which has seen the company half in value over the space of three months.
But does today’s bounce signal a turnaround in Monitise’s fortunes?
Time to buy?
I’ve long been a fan of Monitise, and I believe that the company has a bright future ahead of it. There’s plenty of value to be found in the company’s partnerships with major European banks and Monitise’s joint ventures with IBM, as well as Santander should not be overlooked.
Nevertheless, during the past six months Monitise has been subject to an unprecedented amount of pressure. Two of the company’s largest shareholders have started to reduce their holdings while competition in the mobile payments market has increased dramatically with the roll-out of Apple pay across the UK.
These problems have come at a time when Monitise itself is going through a management transition and organisational overhaul.
Indeed, Elizabeth Buse, who took over as Monitise’s CEO at the beginning of this year, is slashing Monitise’s operational spending and CapEx budget to save costs. The company has already reported a significant reduction in cash flowing out of the business, and should now be able to survive for longer with the resources already available to it. At the end of June, Monitise reported a cash balance of £89m.
Still, Monitise is a company in the early stages of a recovery. It’s clear that the group has made a number of errors over the past five years. Regaining the market’s trust is now an essential goal for management.
And management’s last chance to regain the market’s trust will be when Monitise releases its 2015 financial year results, which are scheduled to be published on 9 September 2015.
Last chance saloon
Monitise’s future depends on the outlook it issues alongside its results for 2015. Over the past five years, the company has continually disappointed, missing targets and asking shareholders for more cash to fund growth. Nonetheless, Monitise’s management has, for the past two years, expressed confidence that the company will be profitable on an earnings before interest, tax, amortization and depreciation basis by 2016.
Monitise’s new management team will have been in charge of the company for nearly a year by the beginning of September. So, Elizabeth Buse and her team should have a clear idea of whether or not this EBITDA profitability target is realistic when they put together Monitise’s full-year 2015 results.
If management sticks to this outlook, the market might start to trust Monitise again. However, if Monitise rewrites its forecasts yet again, the company could lose the few friends it has left.