It’s fascinating to witness a niche market go into melt-up mode after being largely underappreciated for years on end. The urban-media market in general and Urban One (NASDAQ:UONEK) in particular is a prime example of this phenomenon. UONEK stock reflects a sudden shift in the trading community’s attention.
Seasoned investors have seen market trends come and go before. From Bitcoin to cannabis stocks, massive melt-ups cannot and, arguably, should not be sustained. Will the urban-media market experience the same post-pump dump?
More specifically, will UONEK stock’s time in the spotlight last? Traders must think and behave differently now as we’re living in an unusual time and traditional guidelines, while still valuable, might require some adjustment.
A Closer Look at UONEK Stock
Technically classified as a penny stock according to Securities and Exchange Commission guidelines, UONEK has traded under $5 since 2017. Indeed, it’s been a sub-$1 stock at times.
Most of 2020’s first half was discouraging for long-side UONEK traders, as its price relentlessly drifted lower. By June 12, the shares were under $1 again, and relatively few people were talking about UONEK, much less trading it.
Then, an almost inexplicable price explosion happened. Within a matter of days, UONEK doubled and then doubled again. By June 17, UONEK stock was priced at $5.70 per share.
More volatility ensued, followed by a downward drift to the $1.90 level. It’s too soon to determine whether the market has achieved price discovery of UONEK. But at least the frenetic buying and selling has tapered off somewhat.
Prior to June’s price and volume explosion, it was challenging to build a case in favor of UONEK stock. We can blame the novel coronavirus for much of the distress, but it’s fair to say that Urban One wasn’t doing well for much of 2020’s first half.
As evidence of this, we can peruse a handful of bullet points from the company’s first-quarter fiscal results:
- Operating loss of roughly $27.3 million
- Net loss of approximately $23.2 million
- Net revenue down 3.6% on a year-over-year basis
- Radio advertising revenue for April down 58.3%
- “Q2 is pacing -58.1%,” according to Urban One CEO and President Alfred C. Liggins, III
In response to the adverse fiscal conditions, Liggins reported that Urban One cut costs “by means of furloughs, layoffs, significant salary cuts, and reduction of all discretionary expenditure.”
Furthermore, the CEO offered hope to despondent shareholders with the statement that “liquidity remains strong, and I believe we have seen a floor in the revenue declines.”
Seeing Through the Volatility
Liggins’ floor-calling might not have held much weight at a time when the global pandemic’s future course was unknown and unknowable. By design or happenstance, though, the stock soon took an astounding rocket-ship ride.
Nine trading halts for volatility should give you an idea of how wild the ride has been for UONEK stock. Yet it might be difficult to identify a catalyst as there hasn’t been a company-specific development to warrant such heavy volume and outsized price moves.
Still, a couple of indirect catalysts might be at play here. One would be the recent phenomenon of neophyte traders jumping on trends and pushing stock prices up on hype-fueled buying binges.
The other factor could be the widespread protests, which will increase demand for urban media. Undoubtedly, Urban One was well-positioned to capture the moment as tensions reached a critical mass across America’s major cities.
Unfortunately for Urban One’s shareholders, these catalysts aren’t likely to retain their initial intensity. The decline of UONEK stock suggests that traders’ interest may continue to wane throughout the second half of the year.
The Bottom Line on UONEK Stock
Urban media deserves to have a voice, and the spike of UONEK stock, while unexpected, wasn’t necessarily unwarranted. That being said, cautious traders should wait for firmer price discovery as the market and America work their way through these volatile times.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.