Trading Blinkx
Blinkx is a £90 million cap listed on London’s Alternative Investment Market, AIM and is one of the more popular AIM trading stocks amongst spread betters.
Blinkx is a go-ahead technology play, specializing in software that ‘understands’ internet based video by using advanced speech, text and pattern recognition as opposed to traditional search technology which relies on keywords. The goal of this is to categorize online video based on its content, which leads to countless uses with the recent upsurge in video popularity – for instance, it can be used to target advertising based on the content. To-date Blinks has index over 35 million hours of media allowing vievers to search and access the video content on demand.
Blinkx started as a video search engine, part of the Autonomy Corporation, but was spun off into a separate company in 2007, and trades on the AIM. Dr Michael Lynch, the founder and Chief Executive of Autonomy, is a non-executive Director of Blinkx, and has recently sold some of his shares in Blinkx for nearly half-a-million pounds. In case you think this means that Blinkx must have peaked, you should know that this was only 3% of his personal shareholding in the company, and he still owns 7.5% of the company. Insider trading is generally not significant if it is only selling, as shareholders can sell shares for a multitude of reasons not necessarily connected with the company’s performance.
Blinkx has had a shaky start after the launch, when it was felt it would be a rival to Google video and YouTube, and has only just been able to declare a modest profit. Further losses on the same scale would have seen the company out of funds in a little over a year, but the turnaround, however modest, has fired up the market’s enthusiasm and the shares are about 60p, after a rise from 13p in May 2010. In fact in the last year the price has varied from less than 12p to more than 75p. When you consider that the IPO was at 45p per share in May 2007, you can see that there has been a bumpy ride.
On 15th October 2010 Blinkx proceeded to place 23.2 million new shares (representing 7% of the company), which placing raised capital of £19.5 million which management stated will serve to support the growth strategy.
So is BLNX a good bet?
So is BLNX a good bet? Henry, a technical chartist tried his hand at analysing it.
I tried a random search of Rotork on You Tube and Blinkx. I got 43 results on You Tube and 4 on Blinkx. The picture quality was much better on Blinkx and the advertising was more in your face. Blinkx has some good financial videos from Cantos. I reckoned its possible they could get the advertising growth they’re looking for. On current forecasts for 2011 they look to be on target. What doesn’t look quite right is 2012 forecast. The profit forecast out performs the EPS and revenues. I can see how profits can outperform revenues if cost base remains static as advertising increases but I can’t see how at the same time EPS would only rise at half the rate as profit. They had 50% revenue growth, 100% EPS growth and 200% profit growth. IF they did manage to achieve that the 2012 eps x 30-40 might be in order to give a potential share price of 110p-140p so there is a lot of potential IF they make 4x expected current half year profit. In any event it looks like it’s a stock that will make big moves as we saw with 11% yesterday and already pulling back 2.5% today. My conclusion is that it’s worth trading both long and short on technical analysis of something like a 5ema x 10ema. Its currently showing a short trade so I’ll be inclined to wait for a long crossover and hope for another leg up.
Spread Betting Blinkx
Now if you want to spread bet on Blinkx, this is exactly the sort of information you want to hear, as high volatility leads to greater profits. The question is how to anticipate the next moves. You should consider the price earnings ratio, and how that compares to similar companies, and must keep in mind that the performance of Internet based companies is notoriously difficult to predict.
Factors that work in Blinkx favour include that it is planning and has successfully tested a new service called ‘Cheep’, which is supposed to be able to tell when a transaction online is about to take place, and provide a more competitive price. Another plus for Blinkx is that Michael Lynch is a BBC board member, and thus can be expected to know about potential BBC spending. It appears that this may already have worked in favour of Autonomy and Blinkx, as these two companies were selected for the Democracy Live project which was launched by the BBC in November 2009. Democracy Live provides live video feeds of parliament and other assemblies, and uses the technology to match the video to the written records with a search function. Blinkx’s CEO and founder Suranga Chandratillake has noted that video advertising is one of the fastest-growing mediums online and he expects to further accelerate the growth of Blinkx’s business.
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