I’m going to start off with my strongest caveat to date: Non-fungible tokens or NFTs are not worth your time. In my view, talking up this new wave of “digital art” is irresponsible. Although this sector is tied to an innovative technology, the tokens themselves have almost zero provenance.
I understand that NFTs are all the rage these days. But that in and of itself doesn’t justify this explosive industry. Consumer fads are incredibly fickle. I remember a joke that comedian Chris Rock once told an audience of celebrities — you’re here today and you’re gone today. Honestly, unless NFTs prove otherwise, you should truly exercise extreme caution and skepticism with this market.
But there are still some reasons why you should pay attention to what’s going on in the space. So what exactly are NFTs? Great question. In a nutshell, these tokens take the qualities of cryptocurrencies — immutability and the underlying blockchain architecture’s verification process being the most important — and apply them to digital content, which can range from photographs, videos, gifs and even music. Essentially, it democratizes the otherwise rarefied world of fine art.
Think of it this way. If you wanted to buy an original piece by Andy Warhol, you’re likely going to need deep connections to participate in fine art auction houses. With NFTs, people can own unique artwork or content of currently relevant celebrities which are uniquely stamped and verified by blockchain technology. Best of all, anyone can participate — you just need money.
And that’s the appeal — anyone can buy NFTs or create them. That’s right. Starving artists now have another avenue to monetize their work. Certainly, this sector has some appeal. And these publicly traded companies ought to consider getting involved while the going’s hot.
- Amazon (NASDAQ:AMZN)
- Shopify (NYSE:SHOP)
- Spotify (NYSE:SPOT)
- Facebook (NASDAQ:FB)
- Etsy (NASDAQ:ETSY)
- Pinterest (NYSE:PINS)
- AT&T (NYSE:T)
- Liberty Media Formula One (NASDAQ:FWONK)
- GameStop (NYSE:GME)
Now, please bear in mind that these stocks are not necessarily buy or sell ideas. Rather, these issuing companies may garner new opportunities if they participate in NFTs. Still, I will reiterate — buying these tokens directly is an incredibly risky venture.
Companies That Could Benefit From NFTs: Amazon (AMZN)
As I stated above, I believe NFTs are garbage and normally, I wouldn’t recommend companies get involved in them. However, Amazon is the world’s biggest vacuum cleaner, sucking up mom and pops everywhere and consolidating whatever it can under its massive corporate umbrella. Therefore, if the company ends up losing on its tokenized venture, I wouldn’t really care much.
That said, I could be totally wrong about NFTs. In that case, Amazon may want to participate officially in this burgeoning sector. Indeed, by providing a marketplace for digital artwork and tailoring a platform that allows people to create their own tokenized content, the e-commerce giant could quickly dominate yet another market segment.
If it happens, it’s probably not going to move the needle for AMZN stock. I like Amazon because it’s an economic inevitability, not because it’s a blockchain innovator.
Indirectly, Shopify is already participating in NFTs. From a PYMNTS.com report, a “startup in San Francisco called the Real Items Foundation has developed a plugin for Shopify that will use blockchain technology to make sure items being sold on the site are authentic.”
Essentially, the Real Items app is powered by a cloud-based blockchain architecture called TAM, which allows companies to create their own NFTs which are associated with actual physical items. From there, prospective customers can buy the items and scan it for NFT-based authentication.
It’s a nifty idea and one that demonstrates the power of NFTs beyond their popular usage as a platform for crass consumerism. As with Amazon, I’m not sure if this will move the needle for SHOP stock. Still, the underlying management team ought to consider at least exploring the potential.
A popular audio streaming and media services firm, Spotify is probably one of the natural beneficiaries of NFTs. As you know, Spotify aims to provide a happy medium for artists and entertainers, facilitating a global platform for their content while ensuring that these performers are paid for their efforts. It’s not a perfect system, of course, but it was better than the old days of the internet when people could just rip off music for free.
But with the novel coronavirus pandemic disrupting the live touring industry, these same artists are now struggling with the loss of a pivotal revenue channel. That’s where NFTs come into the picture. By tokenizing music — yes, this is a thing — fans can now own unique, signature pieces of their favorite artists.
Unlike other publicly traded companies, non-fungible tokens might actually move the needle for SPOT stock, so long as the tokens themselves stay relevant. We’ll see what happens.
The world’s biggest social media network with 2.6 billion monthly active users, Facebook is truly a paradigm-shifting international phenomenon. And the company has embraced the cryptocurrency concept, working hard on its own cryptocurrency called Diem (formerly known as Libra). With that in mind, the company may also want to consider NFTs.
Being that it’s a massive company, the venture into these new wave of tokens wouldn’t hurt FB stock if it failed. Also, Facebook absorbed multiple controversies in the past. If they support NFTs and the whole plot implodes, it’s not as if the incident is going to sully the company’s reputation. The CEO and the rest of the executive team is already doing a great job of that on their own.
Plus, those billions of users could bring unprecedented credibility toward non-fungible tokens. Contextually, I see more upside and limited downside for Facebook.
In many ways, I feel bad for suggesting NFTs to Etsy. If this digital art market goes belly up, it probably wouldn’t affect the alpha dogs that I mentioned, neither financially nor reputationally. However, I like Etsy and its mission to democratize arts and crafts (as in real arts and crafts) for the world to enjoy.
In contrast, I find the art in tokenized art mostly self-serving and perhaps even predatory. Don’t send me hate mail regarding this opinion — I fully realize that this doesn’t apply to every NFT participant. But you got to look at some of the crap that’s sold as digital art. Any intellectually honest individual should see where I’m coming from.
Anyways, if the NFT phenomenon makes a fool out of skeptics like me, then Etsy may want to wade into this arena. If anything, it will give the company’s platform an additional revenue channel to advantage.
An image sharing and social media platform, Pinterest is one of the most popular Covid-19 winners. With millions of workers stuck at home due to lockdown initiatives, many found extra time on their hands. Thus, Pinterest provided a space where people could seek out their next purchasing idea. Furthermore, many if not most worker bees are still engaging remote operations.
But at some point, the core business may start losing its luster. One of the powerful elements of NFTs is that they’re technologically and sentimentally tied to cryptocurrencies, which of course is massively popular with young investors. Therefore, if Pinterest finds some way of incorporating tokenized art into its business model, it could spark new demand for its equity shares.
Although I’m a shareholder of AT&T, I can’t help but find the company less than attractive, particularly for its customer service, which desperately needs improvement. Also, some of its internet services are lacking — I would know because I used to be a customer.
But what really turns off analysts from T stock is the underlying company’s debt problem. As you know, AT&T made some big bets on expanding its content entertainment portfolio and the Covid-19 crisis couldn’t have come at a worse time for the telecommunications giant. However, NFTs might save the day.
While the iron is hot, AT&T could potentially tokenize its popular entertainment brands or franchises. Yes, this is crass consumerism at its finest, but management needs to do something creative to help the company out of its rut.
Liberty Media Formula One (FWONK)
In the grand scheme of things, auto racing sometimes gets lost in the hyper-competitive world of professional sports. However, Liberty Media Formula One owns the namesake premiere auto racing championship. And this season is especially interesting because of its rookie class.
First, you have Mick Schumacher, son of F1 legend Michael Schumacher, making his debut. Everyone will be eager to watch if the younger Schumacher can replicate the elder’s successes. Plus, with Lewis Hamilton likely to sweep the table again (come on, Max Verstappen!), it gives F1 fans something to look forward to. Do I smell a tokenized opportunity?
Second, you have other forms of entertainment on opposite ends of the performance spectrum. Schumacher’s teammate, Nikita Mazepin, has garnered the nickname Nikita Maze-spin for his terrible on- and off-track antics. In contrast, Yuki Tsunoda has been an absolute delight, as the youngest driver in the F1 field delivering remarkable, veteran-like passes.
Again, I see tokenizable opportunities everywhere, which could help FWONK stock.
The company that started it all, GameStop at this point needs no introduction. Once left for dead as an irrelevant strip mall entity, GME stock shocked the world as investors on social media egged each other on to bid up shares. In doing so, the heavily shorted GME saw a short squeeze, causing much financial devastation to certain hedge funds … oops.
While it has been an incredible ride to watch and participate in, you’ve got to figure that this craziness will soon fade. It always does. To GameStop’s credit, management is exploring new ideas to make the business relevant for the new generation of gamers. It could probably help its cause by embracing NFTs.
Because the GameStop brand has become part of pop culture, it should consider monetizing this dynamic. This is sort of like disgraced Enron in reverse. I’m sure that years from now, people will still remember GameStop irrespective of whatever happens to GME stock.
So, the time is now. Tokenize or die.
On the date of publication, Josh Enomoto held a long position in T and a straddled position in GME.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.