Avoid Dakota Gold Until It Proves It Can Generate Revenue

DC stock - Avoid Dakota Gold Until It Proves It Can Generate Revenue

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Dakota Gold (NYSEAMERICAN:DC) is a responsible gold exploration and development company that has changed considerably in a short period of time. These changes are all material, so you may be wondering if DC stock is a buy. If you are impatient, the answer is no, as the company generates zero revenue so far.

Dakota Gold is the result of a merger between Dakota Territory Resource and JR Resources that officially closed on March 31. Then, DC stock started trading on the NYSEAmerican exchange on April 5.

Previously, Dakota Territory Resource traded on the OTC Markets exchange. Moving to NYSEAmerican is good news for the company, as it improves the liquidity of DC stock. But unfortunately, during the first few trading days, was there was a considerable volume surge. Just on April 5, it opened at $5.02, made a high of $8.47 and closed at $6.90.

About two weeks later, DC stock closed at $4.69 on April 21, a loss of nearly 7% from its debut price. The early enthusiasm has clearly faded. Now, investors should focus on Dakota Gold’s recent addition of a second drill at its exploration program at the Richmond Hill Gold Project.

This is important news, as the company has several gold projects and a Barrick Gold (NYSE:GOLD) agreement that gives it “exclusive rights to Barrick Gold Corporation’s 145-year data set in the Homestake District.”

However, in its latest 10-Q form for the quarter ended Dec. 31, 2021, Dakota Territory Resource reported cash and cash equivalents of $46.6 million but zero revenue. It is no surprise that for the quarter, the company reported a loss from operations of $5.45 million and a net loss of $5.44 million.

With zero revenue, operating expenses lead to net losses. Investors should wait a few quarters to evaluate revenue growth and profit margins.

The company is not a startup that needs time to generate revenue, but a public company. To me, zero revenue generation for a public company is a red flag specifically for valuation purposes. Things should change soon for DC stock, but until these changes are reflected in earnings, it is best to avoid it.

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On the date of publication, Stavros Georgiadis, CFA  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.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.


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