The Motley Fool

Why I’m kicking myself for missing the Tinybeans 10 bagger

Forgive me for I’ve missed the rise of Tinybeans Group Ltd (ASX: TNY). And it’s always disappointing to miss the rise of a ’10 bagger’ in less than a year.

The Surry Hills-based start-up is now worth $125 million according to local share market investors. It has that market value based on 38.045 million shares on issue and today’s share price of $3.29. This time last year shares changed hands for just 31 cents.

So what’s behind the rise of Tinybeans?

The group is a technology platform or app that allows parents to share and collect family photos of their young children. The Tinybeaners claiming that sharing too many photos of children on alternative social networks such as Facebook or Instagram may hurt the children as they grow older.

The Tinybeans app also has specific features providing parental advice, or tracking development milestones for children for example.

The user growth is pretty impressive, with 3.55 million users mainly in the U.S. as at September 30, 2019.

That’s up 50,000 on the prior quarter and 27% on the prior corresponding quarter. 

The financials are less impressive with it posting an operating cash loss of $560,000 on revenue of just $1.1 million for the September quarter. It has no debt and $5.1 million cash on hand. 

Anyone can see the main problem is the errr ‘tiny’ revenues and a balance sheet not exactly flush with cash. 

However, it might be childish to criticise the revenues.

Why?

For now Tinybeans is probably a scale, network effect, or user growth game as it can focus on monetising the business later.

For example if it charged too much to use the platform most parents would be put off and use free alternatives.

This is conceptually similar to the idea that if Facebook had charged users back in 2005 it would have never taken off in the viral way it did. It’s always been a scale and network effect game. 

As such we can see the true valuation of the unprofitable Tinybeans is somewhat subjective. I’m not a buyer of shares for now, but its growth rates suggest it’s worth watching. 

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Tom Richardson owns shares of Facebook.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Tinybeans Group Ltd. The Motley Fool Australia has recommended Facebook and Tinybeans Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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