Vinco Ventures (NASDAQ:BBIG) stock has had a volatile time, but it hasn’t been alone.
Meme stocks have been volatile this last month highlighting the perils of blindly following posts on Reddit. This can be seen clearly using the VanEck Vectors Social Sentiment ETF (NYSE:BUZZ), a fund that tracks the most popular stocks on social media.
This ETF has trailed the performance of the S&P500 for the past six months. BBIG stock has been right there in the mix, rising from $5 to $8 and then falling again within a matter of days. It trades now at around $5.04.
I believe that meme stocks include the occasional hidden gem. It is with this lens that I would like to examine BBIG stock. What exactly does Vinco Ventures do? And is it a company worth owning?
A Closer Look at BBIG Stock
I actually had a bit of a hard time piecing together what exactly this company does. Reading information from the company’s SEC documents and website it seems that Vinco Ventures is a hodgepodge of different businesses and brands.
The company acts as an investor of these assets and grows them using its B.I.G. Strategy—Buy. Innovate. Grow.
The business in its current form had 2020 revenues of $15.8 million. While this isn’t anything to scoff at, it does not really justify the $866 million market cap on BBIG stock.
It certainly doesn’t justify the $1.0 billion-plus market cap it had when the company was trading at an all-time high of $11.
Vinco’s Tik-Tok Competitor
Vinco Ventures has an important line of business that justifies such a valuation due to the promise they hold. The company owns 50% of ZVV Media Partners which owns 80% of Lomotif (giving the company effective ownership of roughly 40%).
Lomotif is a short-format video-sharing social networking platform similar to TikTok. It has many features that are similar to the massive social media giant and is commonly cited as one of the top alternatives.
Currently, Lomotif has over 31 million monthly active users on its platform. This is a far cry from TikTok’s 1 billion MAU. The social media industry is a winner-take-most market.
Network Effect is a phenomenon where the more users a platform has, the more valuable it becomes. Therefore users will naturally gravitate toward the larger platform creating a virtuous cycle.
However, there is a large market where Lomotif is set to launch that TikTok has not gotten a foothold yet. That market is India.
If you remember, India has banned many Chinese companies from the Indian market amid geopolitical tensions. Lomotif is poised to capitalize on this opportunity. India has 518 million social media users with that number possibly reaching 1.5 billion in 2040. This makes it a massive market opportunity for Lomotif.
There is a lot of risk in investing in BBIG stock. The core business of Vinco Ventures is extremely overvalued at these levels. As a reflection of that, BBIG stock has been extremely volatile.
The stock has seen its value cut in half multiple times only to rally back and eventually reach new all-time highs.
Vinco Ventures has already spun off its NFT business which was the company’s other interesting line. Therefore the future of the stock rests solely on Lomotif and the success of the platform.
While Lomotif holds plenty of promise, it faces a lot of stiff competition in this space. I believe investors should watch BBIG stock from the sidelines.
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On the date of publication, Joseph Nograles 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.
Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.