Jam and marmalade was out this morning as the market woke up with an overwhelming desire for Marmite on its metaphorical toast. As investors brushed the breakfast crumbs away shares in online and mobile video search specialist Blinkx (BLNX:AIM) shot up, jumping nearly 23% to 83.5p.
Revelations that trading is going much better than either management or City number crunchers anticipated can have that effect. Previous acquisitions (Burst Media in 2011, for example) and rising ad spending in general are clearly playing to its strengths.
Blinkx is truly a child of its parent Autonomy. Just like its forerunner, the £247 million cap is pitched at the heart of the digital revolution. And just like Autonomy, it tends to split investors down the middle, a proverbial Marmite stock that you either love or hate.
The emerging video search and advertising market to which it plays holds enormous growth potential. US IT networking giant Cisco Systems (CSCO:NDQ) estimates that mobile data traffic jumped 70% last year to 885 petabytes (what's a petabyte?) a month.
But that's just the start. The US telecoms-to-technology group anticipates compound annual growth rate (CAGR) of 66% from 2012 to 2017, reaching 11.2 exabytes per month by 2017 (what's an exabyte?), with two-thirds of that video. Effectively, based on my back of notebook sums, 451 petabytes of video data a month last year will rocket to 7,569 petabytes by 2017.
No wonder Blinkx has been able to put up such staggering top line growth, revenues jumping from £3.5 million to £71.6 million in the last five years. It could hit £115 million or more this year.
But here's the dilemma. Just how much should investors pay for this growth potential? Its harshest critics believe the Blinkx platform to be little more than an inferior YouTube, yet after the share price hike, the stock trades on a March 2014 price/earnings multiple of 22, according to Canaccord Genuity estimates.
Considering that earnings have been less reliable (falling 11% last year), and that wobbles down the line will be dealt with mercilessly, Blinkx remains a company with which many investors associate the words 'touch, wouldn't, bargepole.' Blinkx is a Marmite stock; you either love it or hate it.