The onset of the Covid-19 pandemic provided a catalyst for remote help desk provider Support.com (NASDAQ:SPRT), boosting the SPRT stock price. But a year later, another event induced an equally astonishing rally.
I’m referring to meme-stock mania. This phenomenon has taken hold of the markets and the financial media in 2021, shining a spotlight on a number of low-priced stocks.
Today SPRT stock certainly isn’t as cheap as it once was. As we’ll see, it’s facing a resistance level that could hinder the bulls’ progress.
Granted, the company is about to carry out a merger, and that’s likely to generate some interest in Support.com. On the other hand, a deep dive into the company’s most recently reported data indicates that the company’s financials are mixed, at best.
A Closer Look at SPRT Stock
During the first couple of months of 2021, SPRT stock was trudging along at $2 and change. But then in March, the share price suddenly catapulted above $7.
That vertical price move wasn’t sustainable, however. In May, the stock declined all the way down to $2 and change.
Did the Reddit short-squeeze rebels take control of SPRT stock after that? It’s hard to know for sure, but it’s certainly interesting that the Support.com’s share price ran up to $9 in July.
There was a quick pullback to $6 after that, followed by a run to $9 in mid-August.
So there appears to be some resistance at that crucial $9 level. Generally, I don’t make a habit of buying stocks as they’re approaching resistance points.
Also notably, Support.com’s trailing 12-month earnings per share is -17 cents. That’s not too bad, but it will be easier to recommend the stock if its annual EPS turns positive.
A Merger Update
Interestingly, the pop of SPRT stock that kicked off in March might not have been caused by Reddit users.
Rather, it could have been the result of a merger announcement.
During that time, it was revealed that Greenidge Generation Holdings would merge with Support.com.
Actually, some folks might describe the deal as an acquisition instead of a merger. That’s because, upon the closing of the proposed transaction, Support.com is set to become a wholly owned subsidiary of Greenidge.
On Aug. 12, Support.com provided an update on the merger process.
Mark your calendar for Sept. 10, as that’s when Support.com will hold a special shareholder meeting to (hopefully) approve the acquisition.
As long as more than 50% of the voting Support.com shareholders approve the transaction, then the merger can move forward to the next phase.
It’s hard to imagine that the deal won’t be approved. From what I’ve seen over the years, shareholder votes like this are usually a foregone conclusion, and their outcomes are rarely surprising.
My point is that any excitement about the upcoming acquisition was probably already priced into SPRT stock back in March.
Besides, that’s not my only area of concern. Support.com’s second-quarter financial results weren’t exactly stellar. It reported:
- Total revenues of $8.5 million, signifying a year-over-year decrease of 23%
- A net loss of $0.8 million, (-3 cents per share), compared to net income of $0.6 million (+3 cents per share) during the second quarter of 2020
- $3 million of gross profits, as opposed to the $3.9 million recorded in the year-ago quarter
- Operating expenses of $3.9 million, which is higher than the $3.4 million posted in the comparable quarter of 2020
Granted, Support.com’s overall financial position might improve after the Greenidge merger is (probably) finalized.
However, the approval isn’t guaranteed, and assessing its likelihood would require us to learn more about Greenidge Generation Holdings. And that’s a whole other can of worms.
The Bottom Line on SPRT Stock
The Covid-19 pandemic and the onset of meme-stock mania put SPRT stock in the limelight, and now it’s hovering at a resistance point.
Meanwhile, a likely merger adds to the excitement over Support.com, but also makes a full assessment of its shares more complicated.
Add in the company’s financials, and I’m cautious on the name.
If SPRT stock pulls back to $5, it will be a much more attractive investment. Otherwise, please feel free to explore stocks with better risk-reward profiles.
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 InvestorPlace.com Publishing Guidelines.