Canaccord Says Helios And Matheson Has 'Large' Revenue Opportunity With MoviePass, Sees 12M Subscribers By 2022

The bullish case for owning Helios and Matheson Analytics Inc HMNY's stock was reinforced after meeting with the company's management, Canaccord Genuity said in a research report.

The Analyst

Analyst Austin Moldow maintains a Buy rating on Helios and Matheson Analytics with an unchanged $15 price target.

The Thesis

Helios and Matheson, the majority owner of MoviePass, is expected to see "continued rapid growth" in the years ahead, Moldow said in a Tuesday note. MoviePass has attracted 2 million subscribers, but its total subscriber base should rise to 12 million by 2022, the analyst said. (See Moldow's track record here.) 

At this level, Helios and Matheson will boast "considerable bargaining power" that will reverse its negative gross margin profile, Moldow said. 

The analyst named the following as key takeaways from Canaccord's meetings with Helios and Matheson: 

The company is proving it can effectively market movies for studios, and has signed deals with two major studios and 10 distributors.

• MoviePass is able to get a discount of around 20 percent on 6 percent of total tickets and is "making headway" with other exhibitors.
• Monthly frequency is "declining," although at a slow rate.
• The company boasts a "self-funding financial model," as it decided against growing faster — which would require raising more cash.

While there are multiple risks ahead, Helios and Matheson has an opportunity for a "large, attractive" recurring revenue business, Moldow said. 

Price Action

Helios and Matheson shares were up nearly 3 percent in Wednesday morning trading at $3.47.

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