2015 has been a much improved year for investors in Blinkx (LSE: BLNX) and Monitise (LSE: MONI) (NASDAQOTH: MONIF.US), with the two companies seeing their share prices rise by 21% and 0.1% respectively since the turn of the year.
This is a big step forward following a disastrous 2014 that saw them lose 87% (Blinkx) and 61% (Monitise) of their value. However, can their income statements also show a marked improvement that will see them in the black within the next couple of years?
The major reason why Blinkx could turn its fortunes around as a business and return to profitability is its strong balance sheet. The company has a considerable cash pile of 74.5m as at September 2014 and this should provide it with the breathing space and time to put into action its plan to turnaround its performance. In fact, it allows it the scope to make considerable acquisitions that could make a real difference to its top and bottom line.
Of course, Blinkxs switch to mobile applications seems to be a sensible one. In fact, the company has stated that it is seeing month-on-month growth and that the challenges it faced last year are behind it. In fact, the market seems to agree with Blinkx, since the company is forecast to deliver a pre-tax profit of 1.9m in financial year 2017. While this is some way off, Blinkx has a good chance of meeting this forecast and, should it do so, investors in the company are likely to be handsomely rewarded.
Unlike Blinkx, Monitise (LSE: MONI) does not have a clear path to growth and, as such, is conducting a strategic review of its business. This may mean asset disposals or a complete sale of the business but, either way, its aim of delivering profitability at the EBITDA level in 2016 still seems to be some way off.
For example, its recent results showed a widening of losses for the first half of the year, with its EBIDTA being negative 30.8m. This is disappointing and shows that the company has a long way to go before it starts to turn a profit.
And, with the mobile banking evolution now in full swing, investors must begin to contemplate the possibility that Monitises business model, rather than its product, is the problem. Certainly, its switch to a subscription based offering may provide greater stability, but it needs to deliver higher sales to cope with its inflated cost base and, looking ahead, it appears as though this may take some time to come to fruition. As a result, the chances of it making a net profit over the medium term seem to be disappointingly slim.
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