Shareholders in Quindell (LSE: QPP) and Monitise (LSE: MONI) have endured a grim 12months.
Monitise shares have fallen by 73% over the lastyear, while Quindell is down by 85% over the same period, despite a barnstorming 80% gain since the start of 2015.
On sale
Thats not all these two former high-flyers have in common: both Quindell and Monitise have put themselves up for sale since the start of 2015.
Both companies have revealed that they have received expressions of interest from one or more third parties, but as yet, no deals have emerged from these discussions at either company.
Is Monitise a buy?
Monitise is currently in the middle of adapting its business to a subscription-based model that should provide recurring long-term revenues.
Im in favour of this, as a subscription model should work well for Monitises service-oriented business, and should provide a more consistent level of sales and profitability in the future.
However, Visas decision to taper its involvement with the firm and develop its own mobile payment resources in-house means that Monitise is likely to lose Visa as a customer from 2016, when the pairs existing agreement ends.
In my view, this is likely to make Monitises growth target of 200m users by the end of 2018 unrealistic.
Whats more, although I believe that there is a big opportunity in the mobile payment sector, I am not sure Monitise is big enough to win convincingly in this market without a takeover or merger deal.
What about Quindell?
Concerns about Quindell revolve around the firms ability to convert all of its accrued revenues into actual cash: this is the focus of the current PwC independent review. If these concerns are proved valid, then Quindell could face big accounting losses.
Quindell shares currently trade on a 2014 forecast P/E of 1.2. Such a low number suggests that the market expects PwC to uncover problems that necessitate big writedowns, in my view.
Of course, its possible that this view is wrong in which case Quindell shares would be a screaming buy at todays price.
However, I believe the odds are stacked against such a positive outcome, not least because the PwC investigation was initiated at the request of the firms lenders, who have far better visibility of Quindells accounts than the majority of shareholders.
For this reason alone, I think Quindell is too risky to invest in until the results of the PwC independent review are known.
In today’s market, I wouldn’t put my own money into Quindell or Monitise. I believe there are far better growth opportunities elsewhere, with less risk.
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Roland Head 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.
