Vinco Ventures (NASDAQ:BBIG) is one of the more puzzling stocks to analyze. Shares of the technology-focused acquisitions company are now changing hands for about $3. At one point, BBIG stock went as high as $12.49 a pop. The stock’s sentiment has weakened in the last few months, mainly because of a lack of operational focus and weak profits.
Initially, the company wanted to cater to every stage of the product lifecycle. Lately, though, it has changed its focus towards investing in companies active in the digital media and entertainment space.
In July, a joint venture between Vinco Ventures and Zash Global Media and Entertainment acquired short-form video platform Lomotif. It is certainly a popular application with more than 225 million app downloads and over 31 million on-platform monthly active users (MAUs) worldwide. Interestingly, it is making a foray into India to increase its user base. The country has outlawed rival TikTok, meaning there is a lot of market share up for grabs.
Meanwhile, the company has announced a new way to bring celebrities and musicians into your living room. The innovative three-dimensional full-scale NFT will allow for immersive experiences, bringing people who love the arts directly into our homes in virtual or augmented reality.
These two initiatives tap one of the hottest investment areas at the moment. Understandably, this is why Reddit liked the stock, and it led to a rally earlier this year. Do not get me wrong. BBIG is a company with the potential to be great, but for now, it lacks substance. Until we see consistent earnings growth, investors should stay away from long-term positions in BBIG.
Management Shakeup Is a Step in the Right Direction
The company has taken a big step forward with the appointment of Lisa King as its new CEO. Christopher Ferguson had served in the position since 2017 and will continue to serve as a senior strategic advisor. The incoming CEO has worked closely with Ferguson for several months to ensure a smooth transition. Steve Garrow, the new COO, will help her navigate the move and report on the company’s operations. He has 25 years of experience in disruptive and innovative technologies.
Lisa King brings a solid track record of working with retail brands to the role. She has worked with Dick’s Sporting Goods (NYSE:DKS) and created disruptive marketing strategies for Raymour and Flanigan Furniture.
With such a major change in management, there will be an interim impact on the company’s strategic approach and operating results. However, these appointments will strengthen the brand, considering the wealth of experience the new hires bring to the table.
Risks Are Not Going Away
As touched upon earlier, there are many things to admire about this company. Vinco is taking the non-fungible token (NFT) and social media world by storm with its latest ventures. In particular, Emmersive NFTs (E-NFTs) are a really interesting prospect due to their uniqueness. However, that does not explain the price momentum we saw earlier in the year. For that, investors will have to thank Reddit, which continues to have an outsized role in promoting risky micro-cap stocks.
Nevertheless, it is important to consider that this business will always need capital. It might become a problem if there is not enough time spent harnessing the businesses already acquired and if the company runs out of cash. In August, the company said it had enough cash for the next 12 months, which means it will have to tap the equity or bond markets soon. That should not be much of a problem if Redditors can induce another rally. However, if, for some reason, sentiment continues to sour, the company’s status as a going concern will come into doubt.
The growth in revenue for Vinco Ventures has been patchy, with no consistent sequential progression. Ultimately, the financials of a business will decide the future of the company. Vinco’s quarterly revenues have shown little progress since 2018, a major red flag for potential investors.
BBIG Stock Is a Day Trade
The volatility in BBIG stock makes it a risky investment. It will have its moments. But it is still a speculative trade at best, at this time. The goal of these trades is to benefit from short-term price momentum. There’s nothing wrong with doing this as long as your position doesn’t last more than three months or six weeks, depending on your investing preference.
BBIG has potential, but it’s still too early to say anything with certainty. I don’t recommend buying this stock if you’re looking at investing in something long-term because of how unstable earnings are right now. Until we see consistent growth in profits, invest only the money you can afford to lose in this one.
BBIG stock will continue to attract more aggressive traders who have shorter trading horizons or those seeking high risk/reward opportunities, so these people may want to consider taking advantage when the opportunity arises.
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 in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.