A
smaller player in the massive mobile payment industry, Miami-based mobile
commerce and payment processing company Net Element (NASDAQ: NETE) is corralled
with larger companies whose share price and brand recognition often drafts off
the momentum of behemoths like Apple, Inc. (NASDAQ: AAPL). As such, standing
out in this market takes considerable tactic and potential, being positioned at
the right place at the right time, or a sweet cocktail of each.
When Apple launched its new Apple Pay service October, 20 2014, the debut triggered a buying frenzy in the mobile payment market. While shares of most mobile payment providers rode the Apple Pay wave, Net Element’s shares slipped lower, catching the attention of Wall Street Daily chief technology analyst Marty Biancuzzo.
“Well,
with a market cap of just $60 million, it’s one of the smallest players in a
mobile payment market that’s only getting larger as the number of mobile
devices continues to proliferate globally … However, while many of its mobile
payment peers have enjoyed riding the wave that Apple Pay created, Net Element
shares have dropped recently…,” Biancuzzo noted in an article titled Small Firm
Set to Crack Big Mobile Payment Market?
The
technology within Net Element’s Unified Payment brand enables merchants to
accept mobile and cashless payments. Unified Payment was founded by Net Element
CEO Oleg Firer and, representative of the company’s potential, in 2012 was
named as Inc. 500 Magazine’s fastest-growing company. The company’s Aptito
platform helps restaurants and hotels extend their reach by providing customer
engagement and loyalty opportunities via mobile devices.
After
noting Net Element’s “rough start” in terms of cash and profit into the mobile
payments market 10 years ago, Biancuzzo pointed to the company’s “bright spot”:
“an enormous jump in revenue – from $1.4 million in 2012 to $18.7 million in
2013.”
Notably,
revenues decelerated 12% in the second quarter due, which the company primarily
attributes to operational restructuring at its Russia location. The company was
still able to achieve its first quarter of profit, however, with net income of
$1.3 million, or $0.04 per share, compared to a loss of $20.2 million, or $0.72
per share, in the comparable quarter of 2013.
Biancuzzo
also highlighted Net Element’s tactical debt exchange agreement with Crede CG
III, Ltd., which eliminated nearly $16 million of the company’s indebtedness,
which will be reflected in third-quarter results, and noted that the move
“should obviously give the firm much more financial wiggle room.”
As
Biancuzzo put it, “In terms of impact, Net Element is in the right market at
the right time.”
On
September 17, Net Element announced the alignment of its own point-of-sale
(POS) mobile payment technology with Apple’s iPhone 6, iPhone 6 Plus and Apple
Watch devices, and the company last week filed a $50 million universal shelf
registration (S-3) with the SEC to obtain financing to develop its technology
and advanced its overarching business strategy.
So
with all the progress, why the so-so stock performance? You may point to lack
of market recognition (which the company is increasing); Biancuzzo surmised
that it’s partially due to share dilution.
“Part
of the reason is the S-3 filing I noted above, which will see a further two
million shares of common stock issued at a par value $0.0001 per share …
Share-dilution concerns have hammered the stock, but the hit should be
temporary, especially given the company’s venture into profitability and the
elimination of that $15.8 million in debt from the balance sheet,” wrote
Biancuzzo.
Add
to that the struggle for brand recognition among larger competition, and Net
Element has a challenge on its hands. But it’s not one that CEO Firer, an
experienced industry veteran, seems worried about.
In
a letter to shareholders earlier this week, Firer said,
“Moving
forward, Net Element aims to execute on its initiatives for accelerated growth
with sustained profitability. Net Element management and board of directors are
committed to reinforcing the company’s underlying business as well as
identifying and pursuing strategic opportunities to increase shareholder value.
“For
the rest of 2014 and moving into 2015 we intend to explore opportunities and
the application of our technologies that will continue to propel Net Element
toward its potential in the exciting global mobile payments market.
“My
expectation is that 2014 will unlock additional opportunities that will
undoubtedly serve to benefit all who are connected to the success of our
Company.”
In
today’s Wall Street Daily article, Biancuzzo also discussed Net Element’s
current revenue streams and the potential benefit it may achieve through
implementation of Apple Pay into its own services.
To
read the article in its entirety visit
http://www.wallstreetdaily.com/2014/10/23/chaos-system-net-element.
For
more information on NETE visit www.netelement.com
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MissionIR is committed to connecting the investment community with companies that have great potential and a strong dedication to building shareholder value. We know our reputation is based on the integrity of our clients and go to great lengths to ensure the companies represented adhere to sound business practices.
Sign up for “The Mission Report” at www.MissionIR.com
Please see disclaimer on the MissionIR website http://www.missionir.com/disclaimer.html
