After Price Surge and Purge, You Can Pick Up a Few Urban One Shares

It’s been a wild, crazy summer for investors of multimedia company Urban One (NASDAQ:UONE). Profiting from UONE stock these days requires nimble timing and nerves of steel.

UONE stock blue chips on a casino table
Source: Shutterstock

If you can handle the volatility and risk, though, there may be great rewards in the long run. Indeed, a recent win in Virginia suggests that Urban One is a company in expansion mode.

There’s also the potential for UONE stock to become a prime target of the meme-stock short-squeeze mob. The million-dollar question is: should traders bet on a price boost from social media traders?

Wall Street is unpredictable, and so is r/WallStreetBets. Still, we can try to make some sense of the senseless markets and, at the very least, decide whether Urban One deserves a small portfolio allocation today.

A Closer Look at UONE Stock

So, let’s start off with a quick glance at the roller-coaster ride that is UONE stock.

In mid-May of this year, Urban One shares were drifting and directionless, and were trading fairly close to $5. Frankly, the price action wasn’t anything to write home about.

The next thing you know, the trading community went absolutely bananas, pushing UONE stock to a 52-week high of $24.16 on June 11.

Now, it’s certainly possible that the Reddit crowd was involved in this rally. However, there was also a news-related catalyst, which we will discuss momentarily.

After the price pop came a precipitous and painful drop. Folks who bought UONE stock during the peak hype phase were quickly punished as the share price sank to $7.50 in early July.

By July 9, the stock had recovered to $9 and it appeared that the worst was over. Could there be a value play here for investors, then?

Actually, a traditional metric indicates that there’s a pretty good bargain here. As it turns out, UONE stock’s trailing 12-month price-earnings ratio is 27.72, which is quite reasonable.

A Win in Virginia

I promised to reveal the catalyst that got traders excited about Urban One, so I won’t make you wait any longer.

On May 10, it was announced that Richmond, Virginia’s Resort Casino Evaluation Panel chose Urban One out of several candidates to build a casino there.

Reportedly, the project is called the ONE Casino + Resort and the anticipated features/amenities should be impressive:

  • 100,000-square-foot casino floor
  • 2,000 slot machines
  • 110 table games
  • 250-room hotel
  • 15 bars and restaurants
  • 3,000-person event center
  • 55-acre park and green space

Let’s not get ahead of ourselves, though. On Nov. 2, Richmond voters will decide whether to permit the project in a referendum pending approval from the City Council.

An Economic Engine

In other words, the ONE Casino + Resort’s fate depends on the local voters.

It seems likely that the voters will approve the casino, though.

As Richmond Mayor Levar Stoney pointed out, “The project will create over 1,000 good-paying jobs, generate a significant amount of new revenue for the city, and establish an additional economic engine in South Richmond.”

In light of this positive news event, I find it interesting and somewhat baffling that the trading community dumped their UONE stock shares.

Fiscally speaking, Urban One is a solid company. In 2021’s first quarter, the company took in approximately $91.4 million in net revenues and operating income of roughly $23.8 million.

Moreover, as Urban One CEO Alfred C. Liggins observed, the company’s “digital business had another strong quarter, with revenues up 64.6% and Adjusted EBITDA up by approximately $3.2 million.”

The Bottom Line

Maybe you’ve heard the chatter about UONE stock being a potential short-squeeze target.

That’s certainly a possibility, but it’s often difficult to profit from anticipated meme-stock movements.

It’s probably easier to conduct your due diligence on Urban One and decide for yourself whether the company is worthy of a moderately sized investment.

For me, at least, the answer is evident. Given the company’s solid financials and likely expansion in Virginia, the future looks bright for Urban One.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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