“The #1 Tech Opportunity of the Decade”

On February 8th, Luke Lango is making his biggest call of 2023. He’s recommending technology (that you’ve likely never heard of) that could help 122 million people… And mint up to $3 trillion in wealth.

Wed, February 8 at 8:00PM ET

Why Chasing Rivals Is Not the Best Move for Vinco Ventures

By only considering its social media play, Vinco Ventures (NASDAQ:BBIG) might seem a compelling bet. Through its closed merger with Lomotif, the short form video-sharing app, Vinco looks to make its mark in the exciting make-your-own-music-video space. After all, that’s what got TikTok its massive footprint. Just a slice of that pie could do wonders for BBIG stock.

Image of a person holding their smartphone
Source: Shutterstock

Instead, the market is slicing up Vinco shares, with investors apparently greatly distressed with the company. The first week in August was a run of down days, with BBIG stock shedding 17.2% over the last five trading days. No matter what news items have been coming out — whether the merger closing with Vinco Ventures or Lomotif signing a licensing deal with Universal Music Group — nothing seems to satisfy stakeholders.

It’s only natural to ask why. Though anything can happen in this crazy market, BBIG stock suffers from a credibility issue. Simply, the underlying company is trying to take on Goliath in an ill-fated contest and the numbers just don’t work.

BBIG Stock Faces Big Headwinds

From the get-go, Lomotif is going up against a monstrous competitor in TikTok. While a skilled boxer can occasionally move up weight classes and take the fight to would-be opponents, for BBIG stock, this isn’t so much a categorization issue as it is taking a butter spreader to a machine gun duel.

Don’t misread this — I’m not dismissing Lomotif’s accomplishments. But the app’s 31 million monthly active users (MAUs) is a drop in the bucket for a competitor like TikTok, which boasts 100 million MAUs in the U.S. alone.

As well, it’s not just the massive nominal base but the wildly robust growth rate that TikTok enjoys. As CNBC reported, the team behind the popular app revealed specific U.S. and global user data for the first time last year. The numbers are stunning.

For instance, in January 2018, TikTok had 54.8 million global MAUs. Two-and-a-half years later, this figure skyrocketed to over 689 million. So, unless Lomotif has the goods to drive a similar growth trajectory, the chances that the upstart app could fade into social media irrelevance are quite high.

I must not be the only one that feels this way as the volatility in BBIG stock has been severe. The 20-day implied volatility sits a 1.278.

But it’s not just the dramatic difference in active users. If you’re the smaller outfit, you’ve got to have a unique angle to disrupt the larger competitor(s). But here, it appears Lomotif is just a different TikTok. Until the app offers a distinct reason for users to jump ship for Lomotif, I’m going to be skeptical about BBIG stock.

Pandemic Aftereffect Will Be a Downer

Aside from going head-to-head with a company that outweighs and outplays Lomotif in every possible way imaginable, the pandemic has likely given every social media platform a false sense of security and relevance. Once the public health crisis that is the coronavirus fades away, social media will get a reality check. But that reality check will disproportionately affect smaller apps.

Look at it this way. In the roughly eight months between February 2019 to October 2019, TikTok’s U.S. active user base saw a rise of 49%. Again, over the next eight months, to June 2020 and as the pandemic washed across the globe, the growth rate was 130%.

While that’s a major accomplishment for TikTok and other social media platforms that experienced growth due to the novel coronavirus’ forced lockdowns, this tailwind — at least from a platform perspective — won’t last indefinitely. At some point, TikTok’s young user base will go back to school, enter the workforce or otherwise get on with their lives.

Logically, I see a reduction in activity, with popular platforms shedding many of their new users. So if TikTok is liable to hurt because of normal human transitions, then Lomotif will probably also suffer the same circumstance. And because it has an exponentially smaller footprint, the damage to BBIG stock could be ugly.

Not Enough Hours in a Day

Finally, the biggest reason to stay away from BBIG stock is that there’s just not enough time in a day to utilize the myriad social media platforms out there. As I mentioned in my last write-up on Vinco Ventures, there are over 100 social media platforms competing for attention.

Even if every one of them offered a unique reason to join, most people have other things to do. Invariably, then, only a few receive outsized attention. The rest just fade away.

While 31 million MAUs may sound like a lot, against the standards of global social media platforms, it’s not much to talk about. That being the case, BBIG stock risks irrelevance. Unless you have a compelling reason to gamble on this name, you should probably stay away.

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Read More:Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Josh Enomoto 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.

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.

Article printed from InvestorPlace Media, https://investorplace.com/2021/08/why-chasing-rivals-not-best-move-for-bbig-stock/.

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