Tech Analyst Thinks MoviePass Will Be Out Of Business Within 18 Months

In MoviePass, Helios and Matheson Analytics Inc HMNY bet big against the culture of big-screen movie exhibition. Wedbush analyst Michael Pachter thinks it made a mistake.

What He Said

“MoviePass is a joke and I think will be out of business in 18 months, if not sooner,” Pachter said Monday morning on Benzinga’s PreMarket Prep trading show. “The line I’ve been using is they’re selling dollars for quarters, so give us a quarter and we’ll give you a dollar back. That’s a great deal for consumers, but it’s a really bad deal for them, and they’re just not making money.”

Pachter considers the $10-per-month deal unprofitable, no matter how many movies it allows. Even the new deal of just four movies per month, rather than the previous 30, will bleed capital, by his calculations.

Earlier this month, Helios and Matheson announced a $30 million offering that valued shares at $2.75, about 30 percent below the previous day's close. It also announced a $150 million at-the-market offering that allows the company to continue to dilute shareholders in the open market at its discretion.

“The fallacy in the investment logic on the theaters is that nobody’s ever going to go to the movies again,” he said.

Related Link: Wall Street Grows Increasingly Skeptical Of The Prospects For MoviePass

Why It's Important

Pachter anticipates, at most, a half-percent-per-year decline in theater attendance over the next 20 years, but 2018 and 2019 are expected to post increases on recent, trend-defying records by the “Avengers” franchise and “Black Panther.”

“It’s clear that consumers will go to the movies when there’s something to see,” Pachter said.

To be sure, studios are producing fewer movies, but the lack of options are offset by bigger blockbusters — a category Pachter said has a faithful and steady following. “I do not see that declining,” he said.

By his assessment, over-the-top streaming services like Netflix.com, Inc. NFLX have had no impact on theater attendance, as their original content is non-competitive with that produced by major studios.

At time of publication, Helios and Matheson shares were down 6.5 percent on the day to $2.30.

Listen to Pachter's full interview in the clip below. His segment on MoviePass begings around the 49:45 mark.

PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunes, Soundcloud and Stitcher.