price prediction 14-Aug-08 09:22 am Time for a reality check, because this is moving into the realms of fantasy. I set out below an extract from a post I made last January, which is still largely relevant (I have changed a couple of sentences to make the explanations clearer):
"a share can only be truly worth the discounted cash flow value of all future income attaching to its ownership. This is normally taken to mean dividend income, but in the case of early stage companies, where future income flows are difficult (if not impossible) to predict, there is a premium attaching to the prospect of take-over, which may result in a premium attaching to the share price. The amount of this premium will vary according to mood, rumour and a host of other factors. It is not possible to justify the amount of it using normal measurements. I believe Blinkx falls into this category, but it does have the attraction that it is likely to become profitable (and therefore have a measurable p/e and dividend yield) in the medium term.
Blinkx would not be a cheap acquisition because the high number of substantial investors are probably in it for the longer term and any offer price would have to be substantial to persuade them to sell. The holdings that are listed are as follows:
Autonomy 9.9%
Fidelity 8.9%
Michael Lynch 8.6%
William Blair & Co 8.6%
F&C Asset Management 7.4%
HBOS 6.3%
Standard Life Investments 4.5%
Baillie Gifford & Co 3.0%
What seems important to me is that Blinkx grows its revenue and moves towards profitability ahead of schedule. It goes without saying that it has to be equal to or ahead of its competitors, or have different capabilities, for this to happen.
I think we will see a change in the profile of the share when some reliable data is forthcoming."
Not much has changed since I wrote that. What is clear to me is that the next results announcement is important, because it will give investors a better idea of when profits are likely to start to flow. We are still a long way away from being able to predict (with any degree of certainty) what the eventual numbers are likely to be, or when dividend payments are likely to commence.
Thus, to state what the price of the share is going to be at a point in time, based on unsubstantiated opinion, is a bit silly. It might be thought to tending towards ramping.
I agree that blinkx's prospects are exciting and I am in it for the long term (hopefully!). It is interesting to follow the share price from day to day, but the most important thing is that the company continues to make progress that is reflected in its results. There is bound to be the risk that things don't progress according to plan, but it is to be hoped the risks can be managed and that Autonomy's technology, combined with Suranga Chandratillake's (and his team's) enthusiasm and evident expertise in the field will win through in the end.
