Wednesday, November 23, 2016

Net Element, Inc. (NETE) Has Its Fingers in Many Online & Mobile Payment Pies

There is a palatable plate of pies in the online and mobile payments food chain, and Net Element, Inc. (NASDAQ: NETE) is a company with its fingers in many of those. According to industry analysts Euromonitor, global e-commerce sales are set to reach $1.2 trillion this year, up from $1.0 trillion in 2015. Continued growth is widely anticipated. The forecasts for 2017 and 2018 are $1.4 trillion and $1.6 trillion, respectively, and at present, mobile e-commerce business comprises about a quarter of those figures.

In addition, the global point-of-sale terminals market is, according to Grand View Research (, ‘expected to reach USD 113.27 billion by 2024’, with mobile point-of-sale accounting for about three-quarters of that segment. Those are awfully large pies for the taking, and global technology-driven company Net Element, specializing in mobile payments and value-added transactional services, is laying the table with a smorgasbord of products for retailers and consumers alike.

Net Element’s transactional services business has been doing particularly well. A report from Zack’s Small-Cap Research ( detailed that revenues from the company’s ‘US card processing services, grew a healthy 42.9% from $7.8 million to $11.2 million– all internally’ during the third quarter of 2016. Revenues for the nine months to September 30, 2016, were $29.4 million, representing 76 percent of total revenues.

The transactional services business enables merchants to accept credit cards, debit cards, gift cards, checks, loyalty programs and alternative payment methods. And both traditional card-present or swipe transactions and card-not-present transactions, such as those conducted over the phone, through the Internet or on a mobile device, can be accommodated.

The mobile payments business, operating under the subsidiary Digital Provider, LLC, recorded sales of $5.0 million for the nine months to September 30, 2016. Digital Provider offers carrier-integrated mobile payments solutions over an extensive geographic coverage capitalizing on Net Element’s existing relationships with mobile operators.

Net Element’s PayOnline transactional gateway services had revenues of $4.5 million for the nine months to September 30, 2016. This Net Element division provides flexible high-tech payment solutions to companies doing business on the Internet or in the mobile environment and specializes in integration and customization of payment solutions for websites and mobile apps. Presently, PayOnline is focused on providing online and mobile payment acceptance services to the travel industry through direct integration with a number of leading Global Distribution Systems, such as Amadeus and Sabre.

Net Element has also developed, Aptito, a unique restaurant point-of-sale product that aims to use mobility to give managers and staff greater control. The Aptito iOS cloud-based platform offers a comprehensive array of management and payment services specially designed for the food and beverage industry. Aptito features digital menus (instead of traditional laminated paper stock ones), mobile point-of-sale (no running back and forth between tables and counter) and a Mobile Communicator that allows wait staff to send orders directly to the bar or kitchen. Aptito will reduce the time and energy wait staff expend going in person from diners to kitchen and back, undoubtedly improving customer service.

The Zacks report paints a rosy future for Net Element, setting a valuation based on 7.5 times the enterprise value to trailing 12-month gross margin. This indicates the stock could be worth $4.18 if it were profitable, rising ‘to $7.30 next year using 2016 estimated gross margin of $10.6 million and a share count of 17 million shares’.

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