Mobile money companyMonitise(LSE: MONI)has jumped 20% in early trading today, although theres little in the way of news to validate this bounce. However, todays bounce brings to an end weeks of dismal price action, which has seen the company half in value over the space of three months.
Butdoes todays bounce signal a turnaround in Monitises fortunes?
Time to buy?
Ive long been a fan of Monitise, and I believe that the company has a bright future ahead of it. Theres plenty ofvalueto be found in the companys partnerships with major European banks and Monitises joint ventures withIBM, as well asSantandershould not be overlooked.
Nevertheless, during the past six months Monitise has been subject to an unprecedented amount of pressure. Two of the companys largest shareholders have started to reduce theirholdings while competition in the mobilepayments 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 Monitises CEO at the beginning of this year, is slashing Monitises operational spending andCapExbudget 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. Its clear that the group has made a number of errors over the past five years. Regaining the markets trust is now an essential goal for management.
And managements last chance to regain the markets trust will be when Monitise releases its2015 financial year results, which are scheduled to be published on 9 September 2015.
Last chance saloon
Monitises 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, Monitises management has, for the past two years, expressed confidence that the company will be profitable on an earnings before interest, tax, amortizationand depreciation basis by 2016.
Monitises 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 Monitises full-year 2015 results.
If managementsticks 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.
Your own research
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
