Vinco Ventures (NASDAQ:BBIG) stock has been enjoying a great run recently, though its choppy uptrend seems to be retreating.
BBIG stock has been incredibly volatile in the past month but is trading over 140% from where it was on Aug. 24.
It has a couple of ventures underway which could potentially pay off big down the road, but the business has yet to demonstrate viability, making it nothing more than a meme stock.
BBIG stock has been up an astounding 360% since the beginning of the year. Most of these gains came in August when it became popular among meme stock investors.
Its short volume ratio has been hovering above 20% in the past couple of months, so there are plenty of investors waiting for BBIG to tumble.
With a lack of solid growth catalysts, the violent rally in its stock price could easily reverse. Therefore, investing in BBIG stock is a risky endeavor at this time.
Recent Ventures and BBIG Stock
Vinco and Zash Global Media developed a joint venture called ZVV media Partners earlier this year.
They have acquired short-form video platform Lomotif, intending to rival TikTok. Lomotif has over 31 million monthly active users globally and over 200 million installations.
However, the app scores a measly 3.4 average rating on Google’s Play Store despite its success. It was aping TikTok, but as its user rating suggests, it’s doing a deplorable job at it.
Furthermore, Vinco, through its subsidiary Emmersion Entertainment launched an NFT album with Canadian rapper Tory Lanez. It allowed fans to gain access to the music and the artwork for every song.
The company even states that fans might be able to resell the NFT for a profit.
A lot of it depends on the success of future releases. Naturally, if the future releases are in high demand, only then would it make resale prospects more lucrative.
However, Vinco is most likely to be limited to its original agreement with the artists. It remains to be seen how profitable these NFT creative works can become in the long term.
Until these questions are clear, though, BBIG stock remains a high-risk investment.
Vinco’s financial performance is a major concern that is likely to dispel most investors from placing bets on the company.
For starters, dilution has been a massive problem for the company as its share count has risen by over 990% on a year-over-year basis to 97 million.
Based on its current valuation, BBIG stock trades close nine times forward sales. Moreover, there are still a large number of warrants and convertible notes on the books.
The second quarter had $80 million in its cash till to go along with $5.75 million in debt. Revenues during the quarter were at $2.69 million, representing a 48% drop from the prior-year period.
The company’s net loss widened to $183.9 million from a net loss of $1.62 million. The sharp increase in losses is attributable to the issuance of new warrants during the period.
Looking ahead, Vinco needs to demonstrate it can effectively run a financially sound company that is free of dilution and additional debt.
It also needs to convince the market to produce consistent sales from its relatively unproven approach.
Bottom Line on BBIG Stock
BBIG is another stock that has caught fire due to the retail trading frenzy. Like many other meme stocks, though, it lacks the long-term growth drivers which could help sustain the rally.
Therefore, it remains an incredibly risky investment until the company can demonstrate that its ventures can generate stable cash flows.
It’s best to avoid BBIG stock for now.
On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.