Vinco Ventures (BBIG), a digital media company, is the latest meme stock to have gone through the roof in the past couple of weeks.
Various investor chatrooms like Reddit’s r/WallStreetBets and StockTwits have been abuzz with BBIG lately. This NFT play has more than doubled in price as retail investors buy into the social media hype. Consequently, BBIG stock soared 221.95% during the last week of August, while it jumped over 484% during the last 12 months.
Although the stock surged due to a massive social media push, the fundamentals and financials present a relatively bleak picture for value investors. I’m certainly one of the bearish pessimists on this stock. Let’s discuss what investors may want to watch with this NFT stock right now. (See Vinco Ventures stock charts on TipRanks)
Dismal Quarterly Results
Okay, let’s start with the bad news.
Despite the recent hype surrounding Vinco Ventures’ future prospects, on a backwards-looking basis, things aren’t necessarily looking up for this company.
Indeed, Vinco Ventures delivered relatively disappointing numbers during its second quarter earnings release. The company posted a total operating loss of $4.97 million, which was dramatically higher than last year’s loss of $1.21 million for the same period.
Additionally, revenue dropped 48% year-over-year to $2.69 million. While investors in BBIG stock are looking entirely at the company’s future cash flow prospects, these numbers aren’t great.
Gross profit slumped 17%, indicating the company’s core operations thus far are seeing weakness from a margin perspective. Primarily due to the issuance of warrants, the company saw a massive $184 million net loss this past quarter, much higher than many analysts expected.
Importantly, the company’s cash position continued to be drained this past quarter, dropping by nearly $10 million. The threat of a capital raise makes BBIG stock a riskier one for investors to consider, particularly at these elevated levels.
That said, there are reasons why investors are considering this stock. Let’s dive into what all the fuss is about with Vinco Ventures.
Vinco Ventures has forayed into the NFT space by launching its E-NFT platform this year. The budding market for non-fungible tokens (NFTs) has led to a marked rise in the valuations of all companies tied to this sector. Indeed, BBIG stock has been a key beneficiary of this run-up.
Sales of digital collectibles has absolutely skyrocketed of late, supported by rising cryptocurrency prices. Accordingly, NFTs remain an amplified play on an already-volatile crypto market.
Some analysts believe that the pandemic has been largely responsible for the rise in investor interest in NFTs and crypto during this recent bull market run in speculative asset classes. However, whatever the reason for the rising popularity of NFTs, BBIG stock stands as a key way for investors to play this sector in the equity markets.
Should Vinco Ventures’ E-NFT offerings take off, anything is possible. Vinco Ventures is a company that has been struggling from a financial standpoint for some time. However, those betting on a turnaround stock have reason to like the positioning of this high-risk, high-reward play right now.
Vinco Ventures recently acquired an 80% stake in Lomotif Private Limited, which owns the short video content platform Lomotif. Vinco Ventures carried out this acquisition through a joint venture entity named ZVV Media.
Investors seem to like this acquisition for a number of reasons. This deal has the potential to diversify Vinco Ventures’ revenue streams into a new, and growing, segment. Additionally, the digital media space is one that’s seeing a lot of attention right now (similar to NFTs), and is one hyper-growth investors are flocking to.
If Vinco Ventures is trying to lure all the aggressive speculators in the market to BBIG stock, it appears to be doing a great job. The hyper-growth nature of these segments are attractive to investors seeking moon shot plays.
Locomotif comes with high user growth and the potential for parabolic upside in a continued bull market. That said, this deal has come with a rather large premium, causing some investors to wonder if Vinco Ventures overpaid for this deal.
Accordingly, the question of whether BBIG stock is worth the risk is the key question on the minds of many investors right now.
TipRanks’ Smart Score
Vinco Ventures has a TipRanks’ Smart Score of 4, implying it is likely to perform in line with the market. TipRanks’ Smart Score is derived from 8 unique data sets including Analyst recommendations, Crowd Wisdom, Hedge Fund Activity, Media Sentiment and multiple Technical stock factors.
Where will BBIG stock go from here? It’s hard to say.
Indeed, after such a rapid rise in the company’s valuation, perhaps a cooling off period is in order. That said, this company’s valuation at less than $700 million does invite some aggressive investors to think there may be more room for growth if the market can justify valuation expansion with this company.
Earnings haven’t been great, and BBIG stock remains a turnaround story. However, as we’ve seen with other struggling meme stocks of late, the sky really can be the limit if these stocks squeeze.
For now, this is a stock that may be too rich for conservative investors to approach. Those looking to take a position may want to do so prudently, given the potential for outsized volatility with BBIG stock from here.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.
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