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Is Now The Perfect Time To Buy Monitise Plc?

Suffice to say, investors in Monitise (LSE: MONI) were not sad to wave goodbye to 2014. After all, the value of their stake in the company had fallen by an incredible 61% during the course of the year, with investor sentiment declining significantly.

Of course, the major reason for this was the termination of the company’s partnership with Visa, with the long-time shareholder deciding to begin the process of selling off its stake in the business. This hurt sentiment despite other partnerships being entered into, notably with IBM, Mastercard, Telefonica and Santander, all of which could lead to further top line growth for the business and have the potential to more than offset the loss of Visa in the long run.

Profitability

This potential, though, has not been enough to shift market sentiment in Monitise. While the company has continued to increase its customer base and has an enviable position in a wide range of territories, it seems as though the market is more concerned about whether it can ever make a profit, rather than how successful its product is.

Certainly, in previous years there were concerns regarding the likelihood that Monitise’s offering could be copied by major financial institutions with big budgets. While this concern has subsided somewhat, it has been replaced with doubts regarding future profitability and, perhaps of even greater concern, whether Monitise will need further injections of capital to sustain its current loss-making activities.

Financial Standing

In its favour, though, is its current financial standing. While a loss-making entity, Monitise has a significant pile of cash (net cash was up from £86 million in 2013 to £146 million in 2014) and this should allow it to continue to invest in its business moving forward. It also means that Monitise seems to have time to become an integral part of the offerings of many of its customers and to, therefore, build a sizeable economic moat over the medium to long term.

Looking Ahead

So, while Monitise is doing all of the right things, in terms of expanding its operational capacity and winning new partnerships with major, blue-chip clients, it seems as though only a bottom line in the black will be the catalyst that turns its share price performance around. And, with this not expected to take place in 2015, the year ahead could prove to be a rather muted one for investors in the company.

Certainly, it may not be anything like as challenging as 2014 was, but there may be a more appealing time to buy a slice of Monitise during the course of the year.  

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Peter Stephens has no position in any shares mentioned. 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.