2014 has been disastrous for investors in Blinkx (LSE: BLNX). Shares in the video search and advertising company have fallen by an incredible 87% since the turn of the year and, with the company announcing a loss in its recent results, there has been little sign of any improvement in the prospects for the business, or in its share price performance.
However, Blinkxs share price has been up by as much as 8% this week, which is the most impressive gain in recent memory. Does this mean that the share price collapse is finally coming to an end? And, perhaps more importantly, is now the perfect time to add a slice of Blinkx to your portfolio?
As mentioned, Blinkx now expects to make a loss for the full year after releasing a very disappointing set of interim results. Indeed, its of little surprise that the companys share price has been hit so hard, as Blinkx is undergoing a transitional period where it is shifting its focus away from desktop (which until the current financial year had dominated its revenue stream) and towards mobile (which now accounts for 20% of the companys top line).
Of course, any transitional period brings doubt and in Blinkxs case this centres on whether it can become highly profitable through focusing on mobile rather than desktop. Working in its favour, though, is a considerable cash pile that should at least provide it with the time it needs to shift focus to mobile over the coming months.
As with any transitional period, there will inevitably be a number of lumps and bumps. In Blinkxs case, this could mean a more challenging second half of the current year than the company is anticipating and, as a result, it would be of little surprise for current guidance to be reduced. Indeed, even though Blinkx is expecting to return to profitability next year, this should not be taken as a given, since the transition that is taking place is very significant and is being undertaken over a very short space of time.
As a result, investors may wish to wait for further news from the company, in terms of how its transitional period is progressing, before buying a slice of Blinkx. So, while it is encouraging to see shares in Blinkx making strong gains in recent days, it is likely that there could be more bad news to come. As such, Blinkx could be a share to watch, rather than a share to buy, at the present time.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.