Why Shares In Monitise Plc Skidded Today

Monitise Plc (LON: MONI) lowers full-year revenue guidance but still anticipates profitability by 2016.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 8 July, 2014 9:50 am BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares of Monitise (LSE: MONI) fell by as much as 13% in early trade, after the mobile banking technology platform lowered its full-year revenue guidance to £95-£97m, or growth of 31%-33% year-on-year. The firm had previously expected revenue growth of 40%, but shifted abruptly to a new subscription-based business model, with lower up-front revenue.

So what: The AIM-traded firm decided to negotiate a small number of big contracts on a long-term subscription basis, favouring this over signing the deals before the end of the year with a large up-front license component resulting in “sub-optimal” subsequent revenue. Monitise expects revenue to grow by more than 25% in 2015. Longer-term guidance — including the intention to achieve profitability in 2016 — has been maintained.

Now what: Monitise said that the new subscription platform “has been extremely well received by our partners, customers and prospective customers”. By the end of 2018 Monitise is targeting 200m registered users each generating an average revenue of £2.50. Monitise has a strong balance sheet with £144m net cash compared with £86m a year earlier and no debt.