Videocast! AEHR 10-Q, MoviePass Update, & BIG News On SMSI !

Stock Research 3 Minutes

Long-time readers should note some significant changes in how I communicate in the public domain. The primary purpose of this forum is now to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.

Accordingly, this document should not be construed as an endorsement or recommendation of the companies or securities discussed herein. I am not an investment advisor and this is not an investment thesis. It is merely one part of the story, which I present for debate in hopes of determining all risks and upside potential. The disclosure at the end of this piece is critical to understanding the content of this document. Further, I frequently trade my positions and may buy, sell, or short the securities mentioned herein at any time, regardless of the facts or perceived implications of this article.

Sometimes it just makes more sense to do a videocast. Click on the link or the embedded video below.

If you want to be spared the details, it’s bullish for AEHR and bearish HMNY, but provides details that anyone involved (or interested) should know.

I also preview some big news regarding Smith Micro (SMSI), which I will reveal on Monday morning. I’ve done some intense digging and found two major developments regarding their relationship with Sprint. I was a buyer yesterday and plan to complete my write up before Sunday night (Update: I was also a buyer this morning, after publishing this post). Stay tuned…

Cheers!

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Disclosures / Disclaimers: I am long AEHR and SMSI. I have no position in HMNY. Further, this is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article.

I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.

I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter.  Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.

I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.

Published by Mark Gomes

Mark Gomes is an Information Technology expert with over 20 years of experience. During his career, Gomes led the investment research efforts at numerous IT consulting organizations, including International Data Corporation (1994-1998), and AMR Research (1998-2004), which was later acquired Gartner Group. In 2004, Mr. Gomes founded Pipeline Data, LLC where he provided investment consulting to many of America's most well-respected mutual fund and hedge fund managers. In 2008, Mr. Gomes semi-retired and began donating his research to Seeking Alpha. He quickly built a reputation for accurately identifying inflection points and M&A candidates. Outside of the investment world, Gomes is a Masters Track & Field World Champion and multi-time world record holder. In 2012, he published "Faster Than Forty", which detailed his diet, lifestyle, and training techniques. Today, he serves as a volunteer track coach to children and adults in the Miami Beach community.

Published

58 thoughts on “Videocast! AEHR 10-Q, MoviePass Update, & BIG News On SMSI !”

  1. Thanks for the video! I was thinking about cash burn and why we haven’t seen additional fundraising yet. Because of the way the debit cards work they have to have the money on hand.

    Are they really going to cut it that close to May to get more cash on hand? If I don’t see it by the end of this month I’m going to be really perplexed.

    I do like they newly announced iHeart deal. It is an offer people can’t refuse, gives upfront cash with minimal risk and could give a huge spike in subscriber numbers. Even if a certain percent of them are only temporary it still lets them inflate their PR sub numbers in the summer.

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    1. Smart packaging (they call it $150 value but it’s really a $59.70 value)… but it’s bad timing with the summer blockbusters coming.

      Then again, one can argue that the timing is intentional, knowing that people will go to many movies over the next few months and then sign up for the full-service (thinking that they will continue to use it just as heavily).

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      1. Yeah they are still in full acquisition mode and experimentation with price points. Which leads back to the financing. They can’t be playing it this fast and loose, they know those blockbusters are coming and they know what their cash burn is.

        Do we really have another round of a 30% cut and warrants left in HMNY at this level? Then we would have to r/s as we would be flirting with minimum listing requirements.

        If subscribers go to movies next month and funds can’t be added to their debit card it will be game over.

        Just had a co-worker stop and talk my ear off for 45min about MP. Getting frustrated trying to predict the future!

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  2. Hello Mark;

    Thanks for the update video on AEHR. Seems like they have a lot of potential going forward.

    Interested in some names you might be looking at for shorting opportunities, if you would care to share at this time.
    Never too early to get prepared for the next downturn.
    Thanks! Have a great weekend.

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  3. Great video. Very detailed analysis. Been waiting to pull trigger on $AEHR and have just done so as it has popped above it’s 50 day moving average. $HMNY numbers look scary. Ted must really be a fly by the seat of his pants type of guy. His statements are all over the place.

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  4. Thanks for the audio cast! Today’s new deal bundled deal with iHeart Radio is an interesting first step to limiting the number of movies one can see a month since the initial price drop to $9.95 a month last year. Other deals (bundled with Fandora) or selling via Costco, etc had no change on the amount of movies one could see. So this is a major test, and an important one given that iHeart radio has a reach of 250 million people, not to mention who are primarily located in the cheaper markets MP wants to reach!! Per my mention on your previous blog, I always thought 10mm was the sweet spot that MP would start imposing across-the-board viewership limits but it’s looking more likely they will start to do that once they get to 5mm – 10mm users, which could happen in the fall of this year, and depending how tight they clamp down, it could wildly change their funding needs – will the limit be 4 movies a month, 8 movies a month (or possibly multiple tiers and/or much higher prices for excessive users)…

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  6. I find it very amusing that HMNY jumps big on VZ disclosing a 9% stake when this info was known since the deal was announced. We knew how many shares VZ received in the deal and we know how many shares outstanding there are. This is why the fools run up the stock and then it gives up most of its gains. Great for traders though!

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  7. That’s why it’s good to have a few chips of casino money in the game, while you wait for the right moment to take the bigger bet. The $2.50 – $3.50 zone is the sweet spot for now and will radically change when the next funding move is disclosed.

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  8. Thanks for the video, and look forward to the SMSI update. It’s amazing to see that in the last 10 years, SMSI had hit 60. It would be fun to map out if things went really well (home runs with Sprint and adding other Tier Is) where the stock could head. 5 bagge, 10 bagger, 15 bagger? That’s why we play the game. Also been in RDCM since the PTT days. With another closed deal or two, it should rocket out of it’s 17-22 range. Think that one is a winner, just takes a lot of patience for the market to develop, and they have all the pieces in place included cash, market leadership, 1st mover advantage, and AT&T and Verizon in production, and profitability. Tempted to buy more.

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    1. Cheers Stephen. All true IMHO.

      RDCM has been slow to break out of its “Wait Time”, but has performed admirably since when it was a “Great Find” at $11. With continued excellence, the “Gold Mine” should come before long.

      With SMSI, if you’ve been around so long, I invite you to take the step of running the simple numbers! We already know that they get ~$10/quarter per subscriber… and Mgt says that 70% of it drops to the operating profit line (and therefore the net income line, thanks to their substantial NOLs). That makes it very easy to calculate how each 100,000 subscribers will/should impact EPS (assuming 25M shares outstanding).

      If successful at Sprint, I think they should end this year with at least 350,000 Sprint subs and add 350,000 more Sprint subs every year for the next several years… plus, with that experience and reputation, perhaps add a new Sprint-sized customer every two years, starting in 2020.

      An easy spreadsheet to build 😎

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  12. Mark, do you think the studios have any reason to want to see Movie Pass fail? Obviously, the upside is increased foot traffic resulting in higher box office receipts as well as higher streaming rights but are there any negative implications to the studios if Movie Pass succeeds? Thanks

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    1. No. I don’t think the big studios are going to give them a cut of anything, but I see no reason why they should hope for MP’s demise. It’s clearly good for movie going.

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  13. Sure the studios are happy with the added traffic to the theaters, but they will not support MP over the theater chains as those relationships run deep. There is only so much money to go around, and nobody want to share theirs with MP. The battle shapes up to be big ( studios / theaters ) verses small ( studio / theaters ). I’ll bet my money on the bigs.

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      1. Shocky,
        Right now I have no position in HMNY. That could change on the 18th. I have some ideas in my pointy little head.

        I would never risk more that $2k playing here, I’m really just interested in the unique story here, LOL

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      2. I’m not short and haven’t been short at anytime since starting this blog. Same goes for anyone I know (to my knowledge). I like being able to say that so people know I have no incentive to be biased.

        In fact, I’d love to see them succeed and to be the one that calls the bottom (especially after picking it at $3 the first time around). Plus, I had a growing rapport with Ted. Obviously, he can’t be happy with me now, but I couldn’t support (or even stay quiet) for what I knew would hurt shareholders.

        I’m doing this as a public service and to showcase my abilities as an analyst, of course. It’s good PR and always feels really good to hear from people that I’ve helped to educate, to make money, and to avoid losing it. Almost as cool as the feeling I get from volunteer coaching the Miami Beach HS kids 😊

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  14. But is there a tipping point when the studios say enough, the current structure of the industry is pushing us all to a slow death domestically as exhibitors raise ticket prices and streaming services continue to push out original content? There are only so many hours a day to consume entertainment. The large exhibitors have no answer how to turn things around domestically. Movie Pass gets people in the theaters, increasing box office receipts for the studios and increasing the value of those streaming rights. Can there come a day when the larger studios say to both Movie Pass and the Big 3, play nice so we can all benefit? Or are the studios willing to allow Movie Pass to fail and hurt themselves in the process? We already see Spotify revitalizing the music industry, don’t the studios recognize the opportunity here as well?

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    1. Business is business. If MP is viewed as vital but not necessary to compensate, they won’t. If it’s viewed as vital, but facing extinction, they might throw them a life line (if the math makes sense). Capitalism 101. Take care of #1.

      BTW, these are all things that investors need to think about BEFORE making an investment. Those who jump first are most susceptible to confirmation bias, as they seek justification for having jumped in. A small lesson for everyone.

      p.s. I think Spotify is a modest part of music revitalization. In no particular order, I believe Vevo, YouTube, Pandora, Sirius, and the Internet in general have all contributed. Discovery and distribution of great new music has been key.

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  15. The exhibitors are already facing multiple threats. The industry is not healthy by any means. Not sure how the math doesn’t make sense in any scenario long term. Everyday Movie Pass exists attendance goes up. If/when they end the year at 5-6 million subs will probably account for 12-15% of movie tickets sold. If they no longer exist January 2019 it will dramatically impact the industry. It will be worse then if they hadn’t existed at all. Subs will have tasted the sweet nectar of subscription. Seems like studios are allowing the exhibitors to run the show.

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    1. Yep, but you are speaking like somebody who hasn’t read what I said about strategic importance of not losing your power in the industry. The big three would rather fight to survive on their own than be beholden to a more powerful force.

      I don’t know how many times I have to say it for somebody to understand. It’s business 101. It’s a basic fundamental.

      What you say is 100% true… but IT DOESN’T MATTER in a world where that is a basic fundamental fact.

      Your point is correct and irrelevant. Moot.

      I like you. You are enjoyable part of this community. But this line of rhetoric is growing tiresome (and detrimental to people who care to learn about the basics of how the industry works). So take no offense if I end up deleting repetitive comments that I find false/detrimental to the greater conversation.

      It’s not that I disagree with you… it’s that you’re being persistent with outright misinformation. Persistent being the key word.

      Even Ben and I have come to an agreement on nearly 100% of the story… because both of us understand the basics of business and worked through the various components of what’s happening here to gain a measure of clairvoyance. He gets it and I get it. We disagree on the outcome, but only because I see it was idealistic and he sees me is calculating. In almost every other regard we respect each other‘s knowledge, intelligence, and understanding of the situation.

      That should be the goal of anyone who seeks to earn 7+ figures a year at this business.

      I hope that came across respectfully, because I respect you greatly and only want for your contributions (and therefore your success) to become even more valuable than they have already been.

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  16. Oh and by the way, Movie Pass like Spotify has and will continue to help in the distribution and discovery of great films in the form of movie insurance.

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    1. No sir. I model what I see and hear to the best of my ability. It is not for me to presume how this promotion will affect the future. I can hypothesize, but my primary job is to observe.

      I suspect that the company is curious about the answer to your question as well. I think that’s why they’re doing it. As a test.

      Ultimately, my hypothesis is that it will slow the subscriber growth, but also lessen the cash burn they incur from 1st/2nd/3rd month customers. I don’t think it’s a bad move it all… and I especially like the presentation. It’s not really $150 value, but they can justify that statement, which makes it brilliant as a marketing strategy.

      I’m eager to accumulate observations to see if my hypothesis is correct or incorrect. Cheers!

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  18. Gonna add my 2 cents after posting the link to the new limited-only deal late last night. 1) Downloads in the Apple iOS store seem to holding up during the first 24hours of the transition (but it’s only 1 day!!), 2) We don’t know how aggressively iHeart is promoting this (has anybody heard about this deal on iHeart radio yet?), 3) I also noticed u have only 7 days to activate the iHeart portion of this deal after u become a MP member otherwise u lose the 3 month free iHeart service – as such I think there is minimal revenue share from what MP is charging on this deal and they r possibly keeping the bulk of the revenue (otherwise there wouldn’t be a 7 day limit to claim the iHeart portion), so may just be a cross advertising deal (Mark any thoughts here??) 4) Mitch said most users taper down after the first 4 or 5 months so it will take a pinch of time for them to see how this new deal plays out, but it leads us right to the fall season where I expect the official tiered & cap plans to role out in earnest as they enter the 5mm+ customer zone

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      1. Also this new 3mo deal with a 4 movie limit may be just what the doctor ordered as Mitch said people binge initially & then taper off their use after the 4th/5th month of service, so the new limit is a clever control during a customers peak 1st few months using MP

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      1. One other interesting thing about the Tori Spelling / MoviePass story is that it’s on a UK website and MP talks a lot about a possible international expansion. Hence, the UK would be a logical choice if this was staged or an advertisement as u suggested, perhaps they are about to splash down overseas!

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        1. That would be a horrible move at this juncture. VERY bearish. Prove the model in America first and then move overseas.

          It feels like they are pushing out more PR than usual… perhaps to push the stock price up ahead of the next dilutive round? Hmmm… 🤔

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  20. Pingback: The post Seeking Alpha won’t let you see!   – bobvisse

  21. MoviePass is starting data collection, if you go to your movie viewing history you can now give the movie a thumbs up or a thumbs down

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    1. After EIGHT months (actually 6 years), we can finally give movies a thumbs up or down on MP…. and that’s not even good data. I was expecting a lot more. Very disappointing. Thanks!

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      1. Take it from someone in the web development industry, these things are a ton more complicated than you can imagine. One who has never directly been involved in building an app may find it “disappointing” that features are not built quicker but this is not a reflection on the company; rather it’s a reflection on the industry knowledge of such work. There is a reason successful websites and apps have tens of thousands of tech staff. How many does MoviePass have? Rome was not built in a day. In these 8 months moviepass was primarily focused on hiring a tech staff which remains minuscule compared to its ultimate needs and that staff is primarily tasked with infrastructure and performance. Over time the team will get larger, the infrastructure better, the performance better, and in parallel, this will allow feature development to happen quicker and quicker.

        It’s simply an uninformed opinion to be struck with an emotion of “disappointment” on app development in the past 8 months. I mean comeon really. If it was that easy, google would have 12 employees. That’s not how things work.

        As I’ve said many times there are plenty of valid bear arguments. The bears just diminish their credibility when they pile on and turn everything into a negative.

        These developers are doing a great job catching up on scalability and performance issues supporting the fastest growing subscription service in a highly understaffed team. Just look at the constant job openings in tech positions on the website. They can’t hire fast enough. Have some perspective here guys. The app will work itself out. That’s NOT a bear argument. These people are not dumb. Building a great company and a great app takes a tremendous investment of both time and money.

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        1. You know so much about me. Yes, it’s true… I’m only a little familiar with app development. I was a late bloomer and didn’t write my first program until I was 11 (in 1982)… and was only a professional applications analyst for 14 years (from 1994 until that role enabled my early retirement).
          Guess that’s not enough to understand how incredibly complicated thumbs up / thumbs down is 😂
          MUCH more complicated than the slot machine app I developed in a couple afternoons back in ‘82 😂😂😂
          Seriously though, my disappointment is in their willingness to burn 10s of millions per month on utilization, but not put anywhere near as much effort into the infrastructure to monetize it.
          Am I the only one who thinks they should have built this out quietly BEFORE launching their $9.95 plan?
          #Strategy101

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          1. The thumbs up, thumbs down is more complicated than you think. You cannot just add it to the UI, developers have to integrate these functions into the back end, doing testing, and a ton of technical difficulties. Try to code an app for 2.5 million people, and you will see.

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  23. How can this be taken as bad news, but for perspective, HMNY market cap. ~$125m so the total investment is around $13m, hardly a BIG investment for Verizon, but if Verizon didn’t like what they see they could have sold it off-market in a few days. I am very surprised the shares aren’t up more

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    1. 1. I agree that it’s not negative that VZ took stock, but we don’t know how much cash they would’ve taken in lieu of stock. We also have to wonder why HMNY would use stock for this deal if they thought the stock was so cheap.

      2. VZ is locked up for a year. They can’t sell whether they want to or not. It’s certainly positive that they agreed to the lock up.

      3. HMNY’s market cap is much higher than 125 million. Their fully diluted share account is closer to 100 million at this point.

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