When I checked out AIM-listed Monitise (LSE: MONI) (NASDAQOTH: MONIF.US) last month, there was only one question that mattered: did the share price collapse make it a buy?
With the share price ending January at just 14p, down from its 52-week high of 80p, this looked like a tempting opportunity to pick up the troubled mobile payment specialist on the cheap.
I said the potential multi-bagger was worth a punt, provided you understood it was an outright gamble. I don’t see any reason to change that view.
Buy Or Sell?
If you accepted my bet, your flutter will have paid off, at least so far, with Monitise up 70% in February. But that now leaves two tricky questions begging, rather than one.
First, at this price, is Monitise still a nicely priced buy? And second, should existing investors seize the chance to cut their losses before the next bout of turbulence?
Word Of Warning
Would-be buyers have missed one opportunity to pick up a bargain, with Monitise now up to 23p. But that is still well below its 52-week high.
Last week, Monitise reported a £30.8m loss for the six months to 31 December, up from £10.2m the year before.
Management cheered investors by repeating to its claim that the profits would finally start rolling next year. All we can do is take their word for it.
Cash Is King
Investors who feared Monitise would burn through its cash pile before turning a profit will have been pleased to hear its cash holdings now stand at an improved £127.3m.
That was largely thanks to a much-needed £47.6m of investment from long-term agreements with Santander, MasterCard and Telefonica in November.
But it was market talk of interest from potential buyers that has driven the share price upwards, following reports that Monitise had met several potential suitors in the US.
Oracle, IBM and existing Monitise client FIS are the names in the frame, but the speculation is now in the price.
Monitise is still a gamble, however, but with fractionally less potential upside than before. Given its volatility, I would rather buy on the dips.
The 14p Question
Whether you sell part also depends on your attitude to risk, and emotional factors such as the price you originally paid.
If you bought high don’t hang on purely because you are reluctant to sell low. There may be better ways of recovering your losses.
The road ahead remains long and bumpy. Monetise is still a company with a track record of springing nasty surprises on investors.
What if you were clever enough to buy at 14p? It’s never wrong to bank a profit, and who knows, you might get another chance to buy at 14p in the near future.
This is one stock I would rather treat as a trade than an investment.
