So far this week shares of Monitise (OTCPK:MONIF) have soared even further to the upside. Heading into the holiday closures shares closed at $1.18 in the U.S., roughly $0.65 higher than where I first recommended investors buy the company back in June. Much of the recent run to the upside has been a consequence of institutional investor Leon Cooperman, whom holds a 9.5% stake in the company.
In this article, I wanted to look at the e-gifting trend within the gift card industry and the potential benefits for Monitise. The National Retail Federation predicts that eight in ten shoppers will purchase a gift card this holiday season. Sales of gift cards are expected to surpass $118 billion in 2013, an eight percent increase over 2012 sales according to CEB (NYSE:CEB), an advisory firm that tracks gift card sales.
With the advent of mobile technology, consumers have increasingly been turning to mobile wallets and payments. Last year $300 million in e-gift cards were sold and now the CEB is expecting that $3 billion e-gifts were sold this year. In a report from the advisory firm it was announced that E-gifting is expected to top $10 billion in the years leading up to 2016.
Through Monitise's 'buy anything' product line, retailers, media partners, and banks can easily adapt to the mobile payment market. The company offers its clients instant mobile checkout, mobile marketplace, mobile marketing and online checkout. The majority of these offerings can be bought standalone or included in current company applications. Realistically, a large number of e-gifts will be usable via mobile devices. Just look at the success Starbucks has seen with its own mobile payments and gift card application. As of the most recent quarterly conference call the company stated 11% of it transactions were being conducted via a mobile payment gift card.
Earlier in the year Monitise formed an agreement with Blackhawk Network Holdings (NASDAQ:HAWK) to make e-gift card purchasing available to consumers through certain banks and financial institutions in the United States. If you are not familiar with the company, Blackhawk, the publicly traded subsidiary of Safeway (NYSE:SWY), is the owner of the Gift Card Mall which sells popular gift cards in major pharmacies, grocery stores, and convenience stores. With this new partnership, Blackhawk's extensive network of retail relationships will integrate into Monitise's mobile banking ecosystem. Consequently, it will be easier for consumers to purchase Blackhawk's e-gift cards from popular retail brands via their mobile banking application where offered.
In terms of revenue, e-gift revenues could come in two parts. The first would be as a value added service to its customers. Secondly, Monitise could charge pass-through transaction fees to merchants or financial institutions. For example Monitise could take a cut of Blackhawk's commissions so long as the transaction was completed via a Monitise platform.
The leaders within the gift card industry are expecting continued growth to be powered by e-gifts and mobile technology. Monitise stands in a great shape to take advantage of the increase in e-gift demand as its platform and partnerships focus on both. For investors, any fast move to the upside should be considered from both sides. I will be watching closely to see if the company can sustain itself at these levels in the coming weeks. Valuing a company with such high growth rates is often hard. Moreover, valuing Monitise's current partnerships, something the Street has truly admired, is even harder. Even so, Monitise remains one of my favorite investments heading into the new year as it offers easy mobile finance exposure.
Note- The company trades primarily in London under the ticker symbol (MONI.L)
Disclosure: I am long OTCPK:MONIF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.