Investors will have a difficult time justifying the logic behind buying Support.com (NASDAQ:SPRT) stock. That’s why I suggest that none of them does so.
From a fundamental perspective, there’s little interesting about the firm. However, the company continues to pivot, making it a focus of Reddit users and other social media-driven retail investors.
But let’s start with those fundamentals, since they’re the most important element of Support.com.
Examining the Financials
In most cases, it’s wise to simply disconnect an investment from the hype which surrounds it. That means, at minimum, investors should take a cursory look at the important figures which underpin a business.
In the case of Support.com, the company’s first-quarter earnings report, issued on May 13, suggests that it is a weak firm.
Support.com’s revenues declined 19% year-over-year, sinking from $11.9 million in the first quarter of 2020 to $9.6 million in the first quarter of 2021. So its Q1 sales performance was unimpressive.
Beyond the company’s top line, there were other issues with its Q1 results. Specifically, its net income also continued to trend negatively.
In the first quarter of 2020, Support.com reported net income of $300,000. In Q4 of 2020, the company broke even. Then, a quarter later, Support.com recorded a net loss of $2 million. To be fair though, the company did incur $1.5 million of operating costs related to its upcoming merger.
So more optimistic investors could say that the company’s real Q1 loss was $500,000. Yet investors don’t like to see falling bottom lines. And Support.com’s declining net income should make potential investors hesitate before buying SPRT stock.
But the merger is one of the factors that’s generating interest in Support.com.
The Merger News
Back on March 22, Support.com announced that it was going to merge with Greenidge Generation Holdings, a vertically integrated Bitcoin (CCC:BTC-USD) mining and Bitcoin holding company. Greenidge has a power generation facility in upstate New York.
Support.com has been a remote help desk firm for the entirety of its existence. So, what was the impetus for the merger? An early June news release by the company shed some light on the potential reasoning behind the deal.
That news release stated that the combined company’s:
“new service offerings {would} bring reliable and 24/7 on-demand customer support to emerging fintech leaders, cryptocurrency and NFT platforms, exchanges, and wallet OEMs. The new offerings, including Support.com’s Homesourcing.. Cloud Platform and Crypto Concierge.. service, will solve customer and technical support issues and provide education around cryptocurrency and financial services, leveraging the company’s proprietary security software and deep institutional knowledge.”
So Support.com is going to pivot from traditional help desk services to services geared towards Bitcoin and other cryptocurrencies. Support.com’s shareholders will soon vote on the deal.
Support.com provided an update on the merger voting process on Aug. 12. The vote will be held during a special meeting of stockholders on Sept. 10.
The Bottom Line
If you believe in the future of Support.com’s project, then it makes sense to establish a position in its shares before the vote on the merger. That, of course, assumes that you believe that voters will agree to the merger.
The argument for investing in SPRT stock is that Greenidge Generation Holdings is becoming even more vertically integrated. Support.com’s help desk strengths will likely be quickly leveraged by Greenidge, so Support.com’s strengths will be used to support Greenidge’s Bitcoin, crypto, and fintech initiatives.
That isn’t a crazy proposition, but Support.com hasn’t been a strong performer, while the general crypto craze has died down considerably. A year ago, this merger might have gotten much more attention and interest from investors. But now, I’d watch from the sidelines as it is merely interesting at this point.
On the date of publication, Alex Sirois 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.
