There’s no other way of putting it, Monitise (LSE: MONI) has had a terrible 2014. The company has failed to meet its targets, reported larger than expected losses and warned on growth.
But it’s not all doom and gloom. Indeed, Monitise has also signed some transformational deals during 2014, which should support future growth.
For example, the firm has inked a transformational deal with blue-chip giant IBM, as well as several smaller deals with the likes of Vodafone, Virgin Money, Telefonica, Santander and MasterCard. And although Visa has dumped its stake in the mobile money company, American billionaire and respected investor, Leon Cooperman has continued to praise the company’s progress and remains invested.
So all in all, 2014 has been somewhat of a consolidation year for Monitise.
Still, after breaking a string of promises this year, Monitise’s management needs to regain the trust of its investors. The only way the company will be able to do this is by meeting its own targets.
More importantly, Monitise needs to show that it can stand on its own two feet. In particular, the company needs to be able to sustain itself without constantly asking the market, and its larger investors for more cash.
The most recent fund raising, at the end of November, came in form of a placing to raise £49.2m in aggregate. According to forecasts, this additional cash should provide Monitise with enough liquidity to keep it going until 2016, when management expects the company to report its first profit on an earnings before interest tax amortisation and depreciation, or EBITDA basis.
So Monitise has cash, partners, and targets but trust is still an issue and this is why 2015 will be a make-or-break year for the company.
If Monitise can hit its self-imposed targets during 2015, namely 25% revenue growth year-on-year and capex estimated at £35-45m, while remaining on course to become EBITDA profitable during 2016, then investors might start to trust the group again.
On the other hand, if Monitise misses its targets, asks investors for more cash, or re-adjusts long-term targets, then investors are likely to turn their back on the company for good — over the long-term, by 2018, Monitise is targeting 200m registered users at £2.50 average revenue per user; an EBITDA margin of at least 30%; and a sustainable gross margin above 70%.
The bottom line
Overall, Monitise needs to prove during 2015 that it can be trusted and is making progress towards its long-term goals. Anymore disappointments will seriously dent the company’s prospects.
That said, the company does have potential, so if you’re willing to take the risk, Monitise could be a good bet.
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Rupert Hargreaves owns shares of International Business Machines. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.