In my last column on one-time meme stock Vinco Ventures (Nasdaq:BBIG) stock I warned it would likely take a big hit, as meme stocks were weakening. I also noted that the company’s fundamentals are at best murky and at worst quite weak.
Since then, the shares have tumbled about 60%. Of course, the tech wreck, which I did not predict, also contributed to the decline.
Barring a geopolitical disaster, I think the overall tech sector is poised to rebound very soon. Investors are justifiably becoming less terrified about the impact of rising interest rates.
I expect most former meme stocks, names with weak/cloudy fundamentals, and equities that lack strong, positive catalysts to continue sinking in the coming months. Consequently, I continue to urge investors to avoid BBIG stock.
Lomotif May or May Not Become a Winner
“We completed the acquisition of an 80% interest in Lomotif, one of the fastest-growing video-sharing social networking platforms in its category over the last three years,” said Vinco CEO Lisa King in a recent interview. “More than 750 million videos {have been created) on the platform since its launch.”
When evaluating those statistics, it’s important to realize that Lomotif began operations eight years ago. Moreover, King’s omission of traditional metrics like monthly active users and monthly hours spent on the app makes me skeptical about the true extent of its popularity.
Earlier this month, Vinco finalized the acquisition of AdRizer, whose systems automate the use of artificial intelligence for digital advertising analytics and programmatic media buying.
I’m a big believer in using AI in specific sectors, and automated ad systems have proven that they can greatly increase the ad revenue of websites and apps. Indeed, the top lines of Roku (NASDAQ:ROKU) and Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) have both greatly benefited from the deployment of such systems.
Still, lacking traditional user metrics with which to evaluate Lomotif and assuming that the app has monetized its content little up until now, I find it very difficult to predict the extent to which Lomotif will boost Vinco’s financial results in the future.
Cryptyde and Vinco’s Valuation
In recent weeks, BBIG stock has gained some traction based on Vinco’s efforts to spin off its “consumer blockchain” unit, Cryptyde.
According to InvestorPlace Assistant News Writer Eddie Pan, who cited an SEC document released by Vinco Cryptyde will focus on Web3 (decentralized internet) products, Bitcoin mining services, and consumer packaging.
“Decentralized internet” seems to simply be a new name for “blockchain networks.” There are many companies involved in blockchain at this point, and I’ve seen no indication that Cryptyde has a meaningful competitive advantage in the technology.
Bitcoin’s (BTC) recent retreat, confirms that the value of cryptocurrencies rises and falls primarily based on the amount of stimulus being injected by Washington.
With the Fed poised to completely end its asset purchases in March, cryptos are likely to sink much further in the coming weeks, causing the demand for “Bitcoin mining services” to drop much further.
Also likely to take a hit as a result of the Fed’s withdrawal of asset purchases are meme stocks, whose surge was also largely caused by a large amount of stimulus provided by Washington for much of both 2020 and 2021.
On the valuation frot, despite its recent tumble, BBIG stock is still trading at a massive 26 times its sales over the 12 months that ended in September.
The Bottom Line on BBIG Stock
It’s difficult to determine how successful Lomotif can be, and Cryptyde is facing a tremendous amount of competition. Meanwhile, the termination of the Fed’s asset purchases will be bad news for both Vinco’s shares and Cryptyde’s business.
And finally, the valuation of BBIG stock remains very high. Given all of these points, I continue to recommend that investors sell the shares.
On the date of publication, Larry Ramer 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.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
