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

Tinybeans is growing users strongly. It doesn't have much in the way of revenue but this may make sense given its business model.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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. 

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.

More on Share Market News

A male ASX 200 broker wearing a blue shirt and black tie holds one hand to his chin with the other arm crossed across his body as he watches stock prices on a digital screen while deep in thought
Share Market News

5 things to watch on the ASX 200 on Friday

Will the market end the week on a high? Here's what you need to know.

Read more »

A diverse group of people form a circle at a park and raise their arms together.
Share Market News

Here are the top 10 ASX 200 shares today

It was a phenomenal day for ASX stocks this Thursday...

Read more »

A beautiful ocean vista is shown with a woman whose back is to the camera holding her arms up in triumph as she stands at the top of a rock feeling thrilled that ASX 200 shares are reaching multi-year high prices today
Bank Shares

Big ASX news: NAB shares hit 18-year high

The last time NAB shares were at this level was in November 2007.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Broker Notes

5 ASX All Ords shares upgraded to 'strong buy' consensus ratings

Brokers upgraded their ratings on these ASX All Ords stocks last month.

Read more »

A couple cheers as they sit on their lounge looking at their laptop and reading about the rising Redbubble share price
Broker Notes

2 more of the best ASX 200 shares to buy in February

The broker is feeling very bullish about these shares. Let's see what it is saying.

Read more »

Multiracial happy young people stacking hands outside - University students hugging in college campus - Youth community concept with guys and girls standing together supporting each other.
52-Week Highs

These 11 ASX 200 shares are hitting new 52-week highs today

These shares are on form and hitting new highs today. Let's find out what is happening.

Read more »

A man sits in casual clothes in front of a computer amid graphic images of data superimposed on the image, as though he is engaged in IT or hacking activities.
Technology Shares

2 ASX tech stocks to buy during an anticipated 15% to 20% sector pullback in 2025

Expert reveals 2 of his favourite tech stocks and at what prices we should buy them during a dip.

Read more »

a young woman raises her hands in joyful celebration as she sits at her computer in a home environment.
Share Gainers

Why BWP, Magellan, News Corp, and Winsome shares are pushing higher today

These shares are having a better day than most on Thursday. But why?

Read more »