You can tell how strong the market mood remains against Blinkx (BLNX:AIM) by the sheer scale of today's share price collapse. Yes, the company has issued a profits warning that effectively slices around £5 million off the forecast £43 million to £45 million earnings before interest, tax, depreciation and amortisation (EBITDA) forecast this year.
Not good, but a 45% share price crash, to a four-year low of 36.5p? Has the market gone bananas? Maybe not.
The key line in today's trading update is this: 'We attribute this performance to industry-wide issues of efficiency and effectiveness, which, in our case was compounded by the lingering effects of the disparaging blog about the company.'
It seems reasonable to largely ignore the last bit, damaging as the blog by Harvard professor Ben Edelman was. That sparked a detailed response by a smarting Blinkx in March.
Market factors include ad fraud and privacy, issues keenly felt by an increasingly 'connected' global population, and the dark shadow cast by them over Blinkx, and others, isn't going to go away.
A growth profile that the company itself admits is typically 'back-end loaded’ may also hint at further problems down the line, visibility seems poor.
'We have argued elsewhere that a lot appears to be reflected in Blinkx’s valuation,' say analyst at Citibank. The stock has lost more than 80% of its value this year. 'Arguably, with ill feeling towards the company still lingering since earlier news flow, the stock may already have some form of buffer baked in,' reckon analyst at broker Jefferies.
Shares has in the past explained the marmite-like effect Blinkx seems to ignite in investors, you love it or hate it, nothing inbetween. Yes, the market is a fickle beast but there is no doubting the scale of today's disappointment.
'The implication is a circa 10% downgrade to consensus EBITDA,' says Citibank, before concluding that 'given the gearing in the business, could be even bigger by the time one gets to consensus EPS.'
