Mitek One Billion Potential Users By 2014 And 33% Of The Float Short

| About: Mitek Systems (MITK)
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It is hard to grasp just how transformational mobile check deposit (RDC) is, but when you google mobile check deposit it returns 18 million search results. Mitek Systems (NASDAQ:MITK) has now licensed 25 of the 40 largest banks to use RDC. RDC is currently the most utilized license for mobile data capture yet it may not be the largest potential market.

Progressive Insurance (NYSE:PGR) is licensing a application that allows you to snap a picture of your drivers license and insurance card and then seamlessly get a quote on insurance. These are but 2 of a multitude of applications that have a potential 3.2 billion dollar market by 2018.

According to IE Market Research, " the number of mobile payment users to rise to 1.06 billion in 2014 for a CAGR of 20.5%."

The Opportunity

Leading edge technology offers an amazing investing opportunity to those with the foresight to catch the trend and ride the wave to triple, and sometimes even quadruple, digit gains. In the past, many with this foresight to invest in transformational technologies Google (NASDAQ:GOOG), Priceline (PCLN), EBAY (NASDAQ:EBAY), Amazon (NASDAQ:AMZN), and Cisco Systems (NASDAQ:CSCO) came out as millionaire investors. While others with a lack of knowledge were shorting these stocks, the pioneers had the vision to see that these companies were going to change the way the world works.

Do I need to Remind Them

A lot of capital and willingness to blindly short millions of shares can be enough to destroy many publicly traded companies. However, it can be an investment disaster to recklessly short stocks of ground-breaking technologies that alter the way we carry out our day to day transactions.

Google: the predominant search engine of our time. Google has now developed the android operating system as well. Early Investors in Google has seen the stock appreciate from $85 in 2004 to the over $600 it is today.

Priceline: the ultimate travel portal on the Internet today. Who would have thought a reverse auction site would transform they way many people book their travel. PCLN has gone from $7 in 2002 to a high of $760.

eBay: the premier auction site on the internet. EBAY purchased PayPal and has become a multi billion dollar company. You could have purchased EBAY split adjusted for $1.87 in 1998 and sold it for $59 in 2004.

Amazon: the ultimate store on the internet. Amazon has expanded from books to anything. AMZN could have been purchased split adjusted at $1.50 in 1997 and currently trades at $236.

Cisco Systems: the company was instrumental in the internet revolution. It would be impossible to get information from the internet without the proper routing system, and Cisco System was the clear leader for routing systems. CSCO could have been purchased (split adjusted) at $.06 in 1993 and sold for $77 in 2000.

The Future Technology

The mobile imaging market is being driven by irreversible trends. Most of the phones being sold today are smartphones that have sophisticated cameras. The pixel clarity improves with each new generation. As the mobile camera improves, the capture rate of data improves. One company stands poised to storm the market and capitalize on this technology.

Mitek Systems' Remote Deposit Capture is able to record pictures of checks and accurately deposit them in a bank or brokerage account. MITK has signed up 408 banks including BOA (NYSE:BAC), Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Schwab (NYSE:SCHW) and Fidelity. To date, 137 clients have successfully implemented the technology.

The generational improvement in smartphone cameras is quickly allowing mobile imaging to enter additional markets. The possibilities are unlimited and go so far beyond simply depositing checks. Mitek has already developed an application for paying bills. With this application and one click, you will be able to pay bills from your smartphone.

The Investment

  1. The Independent market research firm AlixPartners has published a mobile banking report funded by Visa favorable to Mitek Systems.
  2. The research report published by AlixPartners calls for 1.5 billion mobile deposits by 2014.
  3. According to the market research published by AlixPartners, the transactional cost of a deposit is cut from $1.50 per transaction to a dime when using mobile check deposit.
  4. Mitek Systems has an application to take a picture of your drivers license and insurance card and get an insurance quote.
  5. Mitek Systems has $15 million in the bank, alleviating the need for additional financing.
  6. Mitek Systems' Bill Pay (pdf) was named best of show at Finovat Spring 2011.
  7. Mitek Systems has developed a point and shoot application to transfer credit card balances to springboard into new markets.
  8. Mitek Systems has a proven and experienced management team.
  9. Mitek Systems has partnered with industry leading banks to propel its growth to the stratosphere.
  10. The current short position in MITK is 6.34 million shares and growing; large short positions can be quite difficult to cover, often resulting in a short squeeze when market conditions turn.
  11. Art Samberg just filed a 13g and now owns over 5% of Mitek. He is one smartest technology investors ever to work on wall street.
  12. Please go to the Mitek Systems website for additional information.

The USAA Lawsuit

The shorts began getting into the stock when it was around $12, and the lawsuit with USAA collapsed the stock, shaving $200 million off the valuation of Mitek Systems. The suit stems from USAA questioning Mitek Systems development of the patents. USSA has questioned the patents and the payment they owe Mitek Systems and Mitek has counter sued for damages.

How Crazy are They

There will undoubtedly be competition in these markets, yet with only 27 million shares outstanding MITK will become a stock where their simply is not enough shares for the demand. For 2 years buying MITK will be driven by the desire to invest in this industry vs the earnings of this company. If you don't believe camera capture is going to transform many industries your probably still depositing checks thru the drive through line. How can any smart institution afford to miss the mobile capture revolution? Shorting this stock below $4 dollars is an absolute suicide mission. With Institutions holding 56% of the stock, Art Samberg holding 6%, and insiders holding 16% it leaves just 22% of the company loosely trading. This means that 4 more institutions acquiring 5% of MITK will leave no shares for sale. With a 6.34 million short position a short squeeze is inevitable.

Disclosure: I am long MITK.