BTIG Research has been a big bull on mobile payments provider Monitise Plc (MONIF) for some time now, and the firm published a new report on the company on Thursday after MONI shares plunged on negative guidance. The report highlights that Monitise shares “came under significant pressure this morning after the company announced that its FY15 revenue would be essentially flat year-over-year – management had previously projected 25% growth – and announced that it had hired Moelis & Co. to explore strategic options.”
Mark Palmer and Giuliano Bologna of BTIG note they are reiterating their Buy recommendation on Monitise, but they are cutting their price target to 52 p (from 92p), with a valuation of 12x their revised fiscal year 2018 EBITDA projection of $113.6 (reduced from $198.7mm).
The analysts also slashed their estimate of the company’s fiscal year 2018 user count to 160 million. Note that this estimate is 20% below the user-count guidance that management reaffirmed this morning. Palmer and Bologna also maintain their fiscal year 2018 projections of a 2.50 ARPU and a sweet 30% EBITDA margin.
The BTIG analysts continue to emphasize that they “believe that MONI’s business model is viable and the value proposition it presents to banks that need to develop secure mobile applications to adapt to changing consumer preferences remains intact.”
However, they also note management clearly underestimated the amount of time it would take for the company to transition to a product-driven, subscription-based model.
Given that Monitise just switched to its new model in March, it is still relatively early in the game with plenty of time to demonstrate the value in the business model. The firm gave up its former enterprise IT model, to a model where it shares a portion of the ARPU generated by a customer’s mobile application.
In retrospect, it’s obvious Monitise should have spent at least a couple more months preparing clients for the transition (as Concur Solutions and Adobe did) instead of the abrupt switchover they implemented back in March that ruffled the feathers of both existing and prospective clients.