Will support hold for Monitise after mauling?

A warning of lower-than-expected full-year revenue and wider losses had Monitise shares crashing by more than a fifth to their lowest since last August. The mobile-payments specialist blamed the shortfall on its decision to negotiate a small number of bigger contracts on a new longer-term subscription basis. It's the second such warning this year - it cut growth forecasts in March from 50% to 40% - and despite predicting sales will leap by a quarter in 2015, profits are still years away and the City is nervous.

It could have been so different. If, as originally anticipated, Monitise had taken large up-front fees on those contracts it would have beaten revenue guidance for the year ending June 2014. Broker Canaccord Genuity was looking for £102 million of revenue and an EBITDA (earnings before interest, taxes, depreciation, and amortisation) loss of £24 million. Instead, Monitise reckons it will grow sales by just a third to between £95 million and £97 million and lose £32 million - £36 million.

Investors took fright, and Monitise, which has tie-ups with both Mastercard and Visa, has now lost nearly half its value this year. "(Monitise) Shares appear oversold to us," says Canaccord. "They have fallen 27% since the beginning of June, perhaps anticipating a large profit warning."

That appears borne out by the relative strength index, which reveals Monitise shares are as oversold as at any time in the past five years. That, however, does not automatically mean a recovery bounce is inevitable. For that, management must, at the very least, deliver the promised new partnerships and customer relationships in the coming weeks and months.

So, what next for the share price? Clearly, such a substantial fall will generate interest, and the shares are hovering around key technical support at 40p. Monitise has net cash of £144 million worth over 7p per share, too. That said, it will take Monitise until 2016 to make a cash profit, and even then just £7 million, according to Canaccord. It will be another year before the big money, and an underlying pre-tax profit of £69.6 million, says the broker.

If Monitise achieves aggressive revenue forecasts, the current share price of 41.5p will probably look cheap. The more risk-averse investor will likely demand further evidence that this is just a one-off.

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