The stock market is filled with semi-pro traders these days as those stuck at home amid the pandemic look for ways to earn some cash. This has given rise to a handful of penny stocks, like WiMi Hologram Cloud (NASDAQ:WIMI) and WiMi Hologram Cloud Stock, that have defied expectations with impressive rallies.
For the majority of penny stocks, those sharp rises are short-lived, but in others, the stock holds on to gains and becomes well-known on Wall Street. Now, some are trying to work out if WIMI is one of those golden opportunities. Investors should be cautious though, as WiMi Hologram Cloud stock carries a lot of risk.
WiMi is a play on augmented reality. The firm’s holographic technology has been touted as ‘the next big thing’ in the tech sector. It could very well be. As 5G rollouts around the world lead to faster connections, it makes sense that investors are looking for companies that utilize the increased bandwidth to deliver a brand new experience.
WiMi Hologram Cloud Stock’s First-Mover Advantage
AR holographic technology has been slow to catch on in large part because of the lacking infrastructure. Why would someone use a jittery, slow connection to view a hologram when they could see the same thing crystal clear in 2D? WiMi stock bulls argue that 5G makes holograms possible, and as a first-mover, WIMI is poised to benefit from that huge growth runway.
Don’t get me wrong — WiMi has some legitimate advantages in the holographic market. It’s the largest holographic AR company in China by content, patents, software copyrights, and holographic content. As InvestorPlace’s Luke Lango pointed out, in such a technical space, those offer a huge boost as far as market share growth.
Where Things Get Fuzzy for WiMi
After hitting the market in April, WiMi Hologram Cloud stock made its way from $3.50 per share to more than $24 per share in the space of two days. The catalyst for that move was a press release touting the firm’s strong position and impressive growth runway came from the company itself.
Not only that, but WiMi almost immediately started issuing new shares following its huge pop. The new shares, offered at just $8.18 per American Depository Shares (ADS), took the share price crashing back down to earth.
Why You Should Be Cautious About WIMI
Don’t get me wrong, I think WiMi could be a moneymaker, but perhaps not for long-term traders. Short-term traders who are willing to watch the stock closely for signs of movement and keep an eye out for news releases might be able to benefit from taking positions in WiMi Hologram Cloud stock. But long-term traders might want to sit this one out for now.
That’s because realistically, the market for hologram technology is still a long way away and no one can be sure whether or not it will catch on. Plus, if Blackberry taught us anything, it’s that first doesn’t always equal best in the tech space.
Then there’s the inherent risk of owning a Chinese company, not only because they’re subject to less stringent audits than their American counterparts, but because it could be Luckin all over again — there’s really no way to tell.
The Bottom Line on WiMi
In the current market environment, I think picking risky stocks like WiMi as a long-term trader is a mistake. I think it makes for a good watchlist stock for short-term plays, but for those looking to build a long-term portfolio, I think WiMi needs to prove it’s legit before traders jump on for the ride.
Laura Hoy has a finance degree from Duquesne University and has been writing about financial markets for the past eight years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN. As of this writing, she did not hold a position in any of the aforementioned securities.