Shares in mobile payments provider Monitise (LSE: MONI) were given a boost this week when the company released an upbeat set of interim results. They stated that the company expects to break even in the second half of the year based on earnings before interest, tax, depreciation and amortisation (EBITDA) and this seems to be a step in the right direction following a very challenging period for the business.
Of course, Monitise booked a loss of around £20m in the first half of the year and anticipates that an impairment charge of around £160m will feature in the current year’s performance as it writes down the value of intangible non-cloud assets. Although that is disappointing, Monitise is set to significantly reduce costs in the second half of the year and market sentiment appears to be picking up in response to this, with the company’s shares up 4% today.
While Monitise’s progress under its new management team is impressive, it is still very early days and the company has a long way to go before it reports a black bottom line. Therefore, it appears to be a stock to watch, rather than buy, at the present time, although its update is certainly a step in the right direction.
Also posting strong share price gains today is 7Digital (LSE: 7DIG), with the music company being 27% higher at the time of writing. This follows an upbeat update from yesterday when 7Digital reported that its 2015 financial performance will meet market expectations and that it is on-track to deliver a profit in 2016. Furthermore, is also announced the signing of a new contract with eMusic, with 7Digital providing additional functionality to customers and it being set to contribute to 2016’s financial performance.
Encouragingly, 7Digital reported a rise in monthly recurring revenues of 72% in 2015 as it continues the positive transformation of its revenue quality and develops healthy increases in higher margin licensing revenues. They increased by 21% versus the prior year and, with gross margins rising to 70% from 52% last year, 7Digital’s financial outlook continues to improve. Clearly, it remains a very small, high risk stock but could be worth a closer look for less risk averse investors.
Meanwhile, shares in Imagination Technologies (LSE: IMG) are also up by a considerable amount today, with them trading as much as 7% higher. This takes their gain to 10% for the week and, while it is too soon to say whether this is the start of a prolonged period of improving investor sentiment, the company’s second half of the year is set to offer a major improvement on its first half. As such, the company’s share price could offer strength in an otherwise highly volatile and potentially weak wider market.
Clearly, Imagination Technologies is undergoing a challenging period and this is evidenced by a forecast fall of 28% in its earnings this year. However, with a rebound of 52% being pencilled in for next year, Imagination Technologies offers significant capital gain potential – especially with it having a wide margin of safety since its shares trade on a price to earnings growth (PEG) ratio of only 0.6.
Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of Imagination Technologies and 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.