Is Blinkx Plc’s Takeover Of All Media Networks A Game Changer?

Should you buy Blinkx Plc (LON: BLNX) following today’s acquisition announcement?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Blinkx (LSE: BLNX) have risen by 6% today after the online advertising company announcing another acquisition as it seeks to improve its long-term growth outlook. This time the company being acquired is internet media company, All Media Networks, which owns a number of websites such as Allmusic.com and Allmovie.com, which, cumulatively, have around 25 million unique users per month. The deal will be paid for entirely in cash (the amount paid has not been disclosed) and, according to Blinkx, it will be earnings accretive in the first year following the acquisition.

Further Progress

The deal appears to have been warmly welcomed by the market, with investor sentiment improving so as to mean that Blinkx’s share price has risen by 10% since the turn of the year. This is a key step for the company, since investors had seemingly lost patience with the future prospects of Blinkx and caused a decline in its share price of 87% last year. And, while it will take time to rebuild investor belief in the future potential of the company, acquisitions such as the one announced today are clearly a big step in the right direction.

Profitability

Of course, what investors want to see from Blinkx is profit. This is due to return in 2017, with Blinkx being expected to break even next year. And, with today’s acquisition being earnings accretive in the first year, it could now be the case that Blinkx is able to turn a small profit next year, which would undoubtedly cause investor sentiment in the company to improve significantly. That’s because it would provide evidence that Blinkx’s new strategy of focusing on mobile rather than desktop and seeking to grow through acquisition rather than just organically is working.

Looking Ahead

Today’s acquisition is unlikely to be the last undertaken by Blinkx in 2015. As mentioned, the deal is being funded entirely by cash and, with Blinkx having a very robust balance sheet and a considerable cash pile, it seems likely that it will be able to afford to make multiple other acquisitions in the short to medium term. This should significantly increase its chances of returning to profitability by 2017 (possibly earlier if it makes more earnings accretive acquisitions this year), which should be the catalyst to push its share price much higher.

So, while today’s acquisition is not a game changer, the series of acquisitions in which Blinkx is engaging looks set to be. As a result, and while its future still has considerable risk from a changing marketplace and the fact that it is a loss-making business, Blinkx seems to be worth buying for its long-term price appreciation potential.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »