SMSI Update… and a CHALLENGE To MoviePass Bulls !!

Stock Research 5 Minutes

Opening Disclosure — 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 and context 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.

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I’m finally home from LA. It was an amazing trip, but it’s great to be back in Miami Beach!

Today, I’ll be presenting another update on MoviePass and Helios (HMNY). In it, I start by promising not to be as boring as I was yesterday, but not sure I succeed. LOL.

 

The fact of the matter is this — THE MOVIEPASS DEBATE SHOULD BE DONE LIVE!

 

So, I’m issuing a public challenge to the bulls. Choose your champion(s) to join me in a friendly (but fight-to-the death) debate on the MoviePass business model. I’m willing to debate up to three willing (and more importantly, able) bulls.

We’ll all go live for everyone to observe and judge for themselves!

So, bulls… find your champions and send them this way. Use the comments section to nominate someone (or yourself).

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Even if nobody steps forward, I may do a live webcast soon. Monologues and blog posts simply aren’t efficacious enough to cover this topic in sufficient depth.

Let me know what you think…

Either way, TOMORROW’S post will be fire. In it, I’ll discuss the companies I saw at the LD Micro conference and reveal the biggest trade I made there (hint: it’s a NEW addition to my portfolio).

With that said, here’s my latest videocast. Enjoy!

 

 

Before closing thing out, I want to invite you all to participate in contributing to my next Special Report. For the last Special Report, over 150 of you participated in my “SMSI Census”. The data which came from that report helped the participants make 25% in just a few weeks!

The next report is going to involve information from local Sprint stores around the country. I’ve already been collecting data from various sources and it appears very bullish for Smith Micro (SMSI). If you participate, you’ll get an early look (at least one week) at the Special Report I will write, which will analyze the data!

Here’s all you need to do:

* Call 3 Sprint Stores in your area and write down their phone numbers.

* Ask them 1) if they have Safe & Found posters in the store, 2) are they selling Safe & Found, and 3) how’s it going? If possible, see if they’ll tell you what % of customers are signing up.

* CLICK HERE and send me your results.

FYI, don’t be surprised if none of your stores have it. Also don’t be surprised if the feedback is negative. Inevitably, there will be some of that. However, from ALL of the data I’ve collected so far…

1) A small-but-rapidly-growing percent of stores have the posters,

2) Over 80% of the stores with posters are actively selling Safe & Found,

3) It’s being received very well, especially by moms. Some stores are signing upwards of 4 customers per day!

To understand what that ALL means (the good and the bad), you have to analyze the data. That’s where I (and the upcoming Special Report) come in.

 

More Research:

 

To get my posts in real-time, just follow/subscribe to my free blog.

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Disclosures / Disclaimers: I am long SMSI. However, 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

29 thoughts on “SMSI Update… and a CHALLENGE To MoviePass Bulls !!”

  2. I think MoviePass can work out in the end… and my initial projection of $1B capital requirements to reach profitability are coming to fruition. While we are both bear now, I completely disagree as to why. It’s typical for companies to invest a large amount of money to build critical mass.

    The problem is the PRICE of the offerings.

    And I’ve concluded the low price of the offerings is due to LACK OF FAITH in management. I bet on the pedigree of Mitch but in the end, the less credible Ted won out this battle. Ted has been dishonest and in my opinion criminal. I believe this SAME EXACT business model run by TRUSTWORTHY management would have raised money at much much higher levels.

    A such – my catalyst to buy back in could come before the business model changes… if Ted resigns, is arrested, and subsequently replaced by credible management – I may buy back then in anticipation of higher valuations on their raises.

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    1. All good points and certainly precipitated by the anti-dilute, which made HMNY’s ownership of MoviePass inevitable.

      That being said, the lack of institutional support is also due to the cash burn being MUCH higher than Mgt telegraphed to institutions. I know a former too-big-to-fail portfolio manager who sold what he had left after reading the latest 10-Q…

      …and THAT stems from what I’ve been saying about the utilization rate not declining…

      and THAT stems from what I’ve been saying about the 35M frequent U.S. moviegoers.

      MP cannot succeed with their current strategy without cutting utilization… and they CAN’T do that while 35M frequent users exist, UNLESS they continue to make drastic usage-policy changes (which I expect) that sufficiently lower the blended average utilization rate. Sufficiently is the key word there. I personally believe, from current levels (-60% gross margins) it’s a catch 22.

      Bottom Line: The weakness is due to a combination of factors, yours and mine. In order to succeed, I believe they will need to retrench and become more of a specialty player (as opposed to trying to take over the world).

      The latter, as you have astutely pointed out, will require at least $1 billion, which — based on my dilution model — I estimate will leave them with 2-3 billion shares outstanding.

      So, they could be worth $1 at that point and still only be a $0.33 stock. Of course, it could also be worth $3 (in what I view as an extreme scenario), but why wade through the next 18 months of dilution when you can sit back and wait for the stock to bottom out (which I believe will occur south of 20-cents, again based on my dilution model).

      This is not addressed to you, Ben, but as I’ve been saying… I’m not condemning the company to failure. I’m condemning current shareholders to losses from current levels.

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  4. I do not own shares 0f HMNY any longer, in/out a long time ago, however, still following and researching and have an idea,

    I think TSLA should merge with HMNY, very same mgmt, styles, can’t see that combo not being successful.

    .Musk, Farnsworth, Lowe

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    1. Interesting less than/greater than in comments is interpreted as a control character.

      Q:Do you have a break-even point for subscriptions where you’ll be in the black?
      A:It’s always been pretty much 5 million subscribers. That’s when we’re cash flow–positive. We’ve always said we’ll hit that by the end of this year, and I believe we’ll hit it before the end of this year.

      Q:Can you tell me where you’re at right now?
      A:We’re putting out an announcement Monday or Tuesday to give an update.

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  6. Mark, on a different subject. AEHR has been slowly moving up. Was there anything said at the LD Micro conference of substance. I have watched your videos where you have a heading of SMSI, AEHR and others but did not catch anything about AEHR. thanks again

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  8. HMNY just released a sub # as 3 million. If my memory is correct, they were around 2.5 mil subs in FEB. It seems the only added 500k in 12 weeks or 40k a week. If this is correct, their sub growth has really slowed.

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    1. Remember they also kicked out the abusers during this time frame. I like how they brag about MovieFone. Has anyone opened that app lately? When they bought it, it was a functioning app where you could see previews and buy tix. Now it is a blank screen. $1M and all that goodwill destroyed.

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    2. Your figures are off as they hit 2mm on 2/8/18 (not 2.5mm then), so that would actually increase/double your weekly calculation to 80k new subs a week. But in general it is a pinch slower than the December/January rush – which isn’t a bad thing as less cash burn.

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    3. It has. I originally had slowed growth modeled in, but the recent hype suggested they had already passed 3M… so now I’m working my model back to reflect today’s news.

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        1. Also your percentage of tickets MP buys looks like it may be too high as their average is only 5% as reported today

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          1. Yes, TODAY… and it’s not 5%, it’s “more than 5%”.

            There will be more subs by the end of the month, which will increase the percentage of tickets purchased beyond the “more than 5%”.

            Further, they said that peak weeks are close to 8%. With Incredibles 2 coming out, I think it’s safe to say that we’re going to have a couple of peak week’s coming.

            In other words, 5.5% for all of June is looking VERY conservative.

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          2. We know Ted likes to exaggerate to the upside, so when he says more than 5% (he wants the market to think something like 5.95%) but history has shown the truth vs his words so its probably more like 5.00001% (LOL). As for Incredibles 2, yes that should be a good one at the box office and probably one of the reasons they delayed the Family Plan until mid-late July!

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          3. Ted cannot exaggerate to the upside in a public document. He only does that in interviews. Plus, I’m very familiar with the company’s history with regard to stating its percentage of tickets sold.

            Honestly, the number for June should be closer to 6% then 5.5%.

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  9. The only public document Ted officially can’t lie in is an SEC filed document, as he legally has to sign that one & be bound to its consequences. He can still fudge a general press release though

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  10. New interview per ScreenRant – Ted says talking with the big theater chains (ex-AMC)

    Question
    I know MoviePass has received a little bit of pushback from theater chains, including AMC. So I was wondering what you guys were looking to do to improve that relationship in the future.

    Answer
    Theodore Farnsworth: This year we’ll spend well over $120 million with AMC, you know. So I think you’re gonna see sooner or later where we will start exerting some of our leverage with an AMC or whatever. We took out 10 AMCs a while ago to see what would happen, and really we had no fallout from a consumer standpoint. What we saw was the theaters in the areas where we took those 10 AMCs out was the other numbers of the other theaters rose dramatically between 20 to 30 percent in traffic. So, we will start doing that stuff if we don’t come to any kind of an agreement with them. But we are talking to some of the bigger ones – we’re in talks with them as we speak. But AMC, I’m not too positive on AMC. We haven’t had a great relationship since day one.

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    1. I’ve addressed this before. All the majors have smart management teams and none of them want movie pass to succeed, so expect them to act with solidarity.

      I could be wrong, but I will err on the side of my hypothesis until proven otherwise. #Business101

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