With all the recent hype around cryptocurrency, it’s not surprising that people are excited to invest in this new world. Due to the astronomical growth in price and adoption of cryptos, the stock market picks are also popping up. They, too, are doing very well. However, it’s necessary to separate the wheat from the chaff. Several companies want to ride the coattails of cryptocurrencies and NFTs (non-fungible tokens). Although there is nothing wrong with that, you must adhere to a golden Warren Buffet rule. “Never invest in a business you cannot understand,” he once said. Hence, it doesn’t make sense to initiate a position with Vinco Ventures (NASDAQ:BBIG) stock at this time.
BBIG’s business model is a bit of an enigma, and its success can be attributed in part to its ambiguity. It’s not the type of company you would easily categorize. But it looks like it is doing well regardless. BBIG is looking to position itself as “a vertically-integrated, end-to-end, consumer product research & development, manufacturing, sales and fulfillment company.” In other words, they wanted their foot in the door across multiple areas, including ideation and R&D through manufacturing up until distribution or fulfillment, including things like marketing.
They are looking for any idea that can potentially lead to outsized returns. They lack a specific niche, making them hard to analyze and value. BBIG stock appears to trade more on momentum. It will not interest investors who are looking at long-term success stories with stable revenue streams. However, it might hold some appeal for day traders.
Lomotif Is the Biggest Catalyst
The most exciting aspect of Vinco Ventures’ story is their continued investment in the development and potential for Lomotif. It is one of the more prominent rivals of TikTok in the short-form video space. The Lomotif app has been downloaded over 225 million times and is currently used in more than 200 countries. It is working overtime to expand its presence in all spheres of entertainment. They have launched a record label, LoMo Records, and a full-scale entertainment channel, LoMo TV. Musical performers Lil Nas X and The Kid Laroi are also collaborating on the company’s platforms, which is sure to drive interest.
Lomotif is on a mission to make its way into one of the hottest markets in the short-form video space — India. The second most populous country is estimated to grow its short video user base to 580 million by 2025 from 275 million users expected in 2020. It is a big market up for grabs. India has banned TikTok in its country because of its ongoing issues with China. That leaves the market wide open for contenders like Lomotif.
Meanwhile, a joint venture between Vinco Ventures and ZASH Global Media and Entertainment inked an agreement to purchase AdRizer for $108 million, a company that specializes in advertising technologies. I believe integrating these two can enhance Lomi’s monetizing credentials and generate business with external clients.
Problem Areas for BBIG Stock
The business model of Vinco Ventures is simple. They are looking out for high-quality companies they can purchase and enhance their portfolio. However, despite the model’s simplicity, they will need to keep a substantial amount of cash on their books to make sure they can continue with their strategy.
Despite having enough cash for at least the next twelve months, BBIG may struggle as a going concern if its capital raising plans become more constrained. Earlier in the year, Redditors helped drive up the price of this stock because it featured several key investment trends that the millennial investor loves, such as short-form video and the white-hot NFT space. But the good times will not last forever, and the company cannot hope for a bailout from Reddit every time it wants to raise capital.
Vinco Ventures’ quarterly revenue growth is nothing to write home about, with no signs of improvement in sight. Given their erratic performance, this makes it difficult to project what its top line will look like for next year. Investors want strong top-line growth and bottom-line growth.
BBIG Stock Is Risky at This Stage
In the era of Reddit, BBIG is the ideal stock to do well. Traders looking to make a quick return will remain attracted to this one for the foreseeable future. That is purely because, like crypto mining company SOS (NYSE:SOS), it invests in the types of things the newbie retail trader finds attractive. However, without smooth recurring cash flow, there is little point in investing in BBIG stock.
On the publication date, Faizan 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.