On March 12, I issued a warning to buyers to sit on the sidelines in regard to China-based expertise firm SOS Restricted (NYSE:SOS). I used to be involved that the sentiment had just lately turned ugly and it wasn’t the precise time to leap into SOS inventory.
Since that point, the share value has declined sharply. Subsequently, the sentiment remains to be fairly destructive — however possibly it’s so destructive that contrarian buyers ought to begin to get .
However shopping for SOS inventory as a contrarian play would solely make sense if there have been causes to love the corporate. And consider me, not everybody likes this firm.
By digging deep and uncovering the info, maybe we are able to discover causes to brighten our outlook and even — for those who can deal with the dangers — begin buying a couple of shares.
A Nearer Have a look at SOS Inventory
It’s most likely not a coincidence that whereas cryptocurrencies like Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) have been rocketing to the skies in early 2021, SOS inventory was additionally heading greater.
This simply goes to indicate that the inventory is prone to comply with cryptocurrency costs. Subsequently, buyers ought to all the time maintain a watch out for developments on the earth of crypto and the blockchain.
Mid-February was an thrilling time for SOS stockholders because the consumers bid the share value as much as a 52-week excessive of $15.88. Sadly, that bull run didn’t final very lengthy.
By the tip of February, the shares have been approaching into penny-stock territory. The U.S. Securities and Change Fee defines a penny inventory as a inventory with a market share under $250 million or $300 million.
As of Could 7, SOS inventory had fallen to $3.91. There have been no indicators of a restoration, not less than by way of the worth motion. But when we give attention to the corporate’s financials, there may be encouraging information to be discovered.
Admittedly, it took a very long time for SOS Restricted to launch its full-year 2020 fiscal data.
However as they are saying, higher late than by no means. The vital factor is that the outcomes are in, they usually’re fairly spectacular.
Listed below are a few of the highlights for fiscal 12 months 2020:
- Complete revenues of $50.3 million, representing a 333.6% enhance in comparison with fiscal 12 months 2019
- Gross revenue of $13 million, signifying a rise of 513.5% over the prior 12 months
- Internet revenue of $4.4 million, a 193.3% year-over-year enchancment
- $10.1 million in working earnings, marking a rise of 475.4% versus fiscal 12 months 2019
- Insurance coverage advertising revenues of $49.2 million, representing a 325.2% enhance 2019’s insurance coverage advertising revenues
With all of these triple-digit year-over-year will increase, the bear thesis for SOS inventory appears overstated.
And but, the share value retains on taking place. This implies a mismatch between financials and sentiment — and due to this fact a potential shopping for alternative.
Part I Accomplished
SOS Restricted has a number of enterprise segments. Nevertheless, it’s the cryptocurrency mining enterprise that could be probably the most essential to the corporate.
The shareholders must be glad to know that SOS Restricted is progressing shortly in constructing out its assortment of crypto-mining tools.
Actually, the corporate only recently accomplished what it calls “Phase I” of the completion of its Leibodong Mine.
That is located within the Leibodong Hydropower Station in Hejiang County, China. SOS Restricted acquired 575 ETH mining rigs on Could 7 and is reportedly getting ready to put in them within the close to future.
As soon as these rigs are put in and operational, SOS Restricted expects to acquire round 400 gigahertz of ETH hash energy.
That’s some severe mining energy, and if that is solely Part I, then the stakeholders ought to put together for greater and higher issues.
The Backside Line
I’ve issued a warning on SOS inventory prior to now. Now, nonetheless, there’s fiscal information that would sign a turnaround.
That being stated, it’s nonetheless sensible to proceed with warning. The destructive sentiment might persist for some time, so please maintain your inventory positions small for those who select to speculate.
On the date of publication, David Moadel didn’t have (both straight or not directly) any positions within the securities talked about on this article.
David Moadel has offered compelling content material — and crossed the occasional line — on behalf of Crush the Road, Market Realist, TalkMarkets, Finom Group, Benzinga, and (after all) InvestorPlace.com. He additionally serves because the chief analyst and market researcher for Portfolio Wealth International and hosts the favored monetary YouTube channel Wanting on the Markets.