Shares in speculative start-up stock Newzulu Ltd (ASX: NWZ) have fallen 15% today after the release of a 'growth update' on Friday. Investors have been excited about digital disrupter Newzulu since it debuted on the ASX, but the only thing it's likely to be disrupting right now is your portfolio.
Despite trading as high as 21 cents in November, Newzulu has lost 50% of its market value in the past 52 weeks, and Friday's update provides hints as to why:
"Despite a sizeable increase in the number of uploads and registered users over the past year, monthly content sales have remained stagnant in the 12 months to April 30."
Monthly sales do vary substantially but based on the graphs provided in Newzulu's update (which are tiny, uninformative and difficult to read), the average number of sales has not increased as the year has gone on.
This is disappointing as it means that take-up of Newzulu's product is not accelerating, which is less than ideal for a speculative disrupter.
However the company did report an 83.1% increase in Agency sales compared to the first quarter of 2014, and this lines up with an 85% increase in third quarter revenues (compared to second quarter) that was reported in the March 2015 quarterly report.
Furthermore, as Newzulu grows it should be able to attain a network effect, rapidly increasing market awareness and therefore sales, customers, and uploads. Revenue growth of 85% quarter-on-quarter is impressive, but while Newzulu continues to issue shares and fails to achieve an operating profit, the company remains highly speculative.
I personally will be waiting for the full-year report to see how the company's strategy and acquisitions are playing out, however with prices at their lowest point all year investors looking to buy in have a compelling opportunity to do so.
