Traders originally gravitated to Phunware (NASDAQ:PHUN) because PHUN stock fell within what seems to be the orbit of so-called Trump stocks. These names are companies associated with — at least to some degree — former President Donald Trump.
The most obvious of these is Digital World Acquisition (NASDAQ:DWAC), a special purpose acquisition company (SPAC) that will be acquiring Trump’s newly formed media and social networking enterprise, Truth Social. DWAC stock blasted off from $10 to more than $100 at one point following the announcement of the deal. Even given the current brutal SPAC bear market, shares remain far above their initial offering price.
Other SPACs have joined the Trump wave as well. For example, CF Acquisition VI (NASDAQ:CFVI) will be merging with Rumble, a Canadian video hosting platform known for controversial content. Truth Social recently announced an initiative to partner with Rumble, leading to increased trading activity in both SPACs.
Phunware falls within this same constellation of stocks. After all, the company provided software services to help Trump’s 2020 election bid, among other things. This association led PHUN stock to spike higher at the same time that DWAC took flight. However, the underlying fundamentals for Phunware are not as straightforward.
Unclear Central Mission and Addressable Market
Phunware CEO Alan Knitowski described the company on a recent conference call. According to Knitowski, Phunware is “focused on the intersection of mobile, cloud, big data and blockchain with business-to-business, business-to-government and business-to-consumer customers worldwide.”
That is so much stuff, you wonder if there’s any primary focus behind PHUN stock at all. The CEO went on to describe a mission to create a Phunware ID for “every human being on Earth.” This ID is supposed to help everyone interact with pieces of Phunware software and cloud applications hosted by or related to Phunware cloud infrastructure.
This is all very heady stuff. But it’s hard to believe Phunware has the resources or technical capabilities to provide that kind of global scale of service. After all, the company has just a few dozen employees and only generates $10 million or so in annual revenues. Trying to touch more users than Alphabet (NASDAQ:GOOGL) or Apple (NASDAQ:AAPL) seems a bit ambitious at this point.
A Wrong-Ways Bitcoin Bet
Phunware has very little in the way of tangible results to back up its boldly stated ambitions. Further, much of the recent trading hype around PHUN stock was simply on hopes that the company might partner with Truth Social in some way or another. Without that, though, what might actually drive shares in 2022?
The obvious thing here is its Bitcoin (CCC:BTC-USD) holdings. In November, Phunware purchased 100 bitcoins for $6.2 million, bringing its total holdings to 129 bitcoin. You’ll notice, however, that Phunware bought almost the top of the market, paying approximately $62,000 for each coin, or a total purchase price of $6.2 million.
Subsequent to that point, the price of BTC has slumped to less than $40,000. This amounts to a loss of more than $20,000 per coin, or a greater than $2 million loss.
Admittedly, that’s not a huge deal for a publicly traded company — Phunware still has a more than $200 million market capitalization right now. Thus, the Bitcoin deal isn’t large enough to move the needle for the firm anyway.
Rather, it seems that management wanted to jump on a hot trend by buying bitcoin near the peak. But this still speaks ill of the company’s strategy, which seems to chase currently popular ideas rather than focus on developing a solid product to gain consumer adoption. Bitcoin bets are unlikely to materially improve Phunware’s outlook.
The Verdict on PHUN Stock
What do you get when you combine a grandiose business vision, some Bitcoin speculation and vague rumors around a potential Trump partnership? You don’t get a whole lot, at least in a tangible sense.
It’s possible that one or more of these things will play out favorably for Phunware. But that’s much closer to pure speculation than any reasonable investment thesis. The company has been a struggling business for years now. Any rallies have generally been good opportunities to sell rather than tied to any lasting improvement in its outlook. If and when PHUN stock pops again, traders should be looking for the exits.
On the date of publication, Ian Bezek did not hold (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.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.