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The BSQuare Corporation share price jumped more than 200% yesterday to end the day at $ 8.04 despite the lack of a significant event that would justify such a sharp rise as trading volumes were 600 times higher than the daily average with over 240 million shares traded in the hands. during the session.
There was almost no mention of the action in the Reddit WallStreetBets messaging chart based on data compiled by meme-stock tracker Swaggy Stocks, while the BSQR share’s short float stands at 6. , 4% – which makes a shortcut game very unlikely.
Since the stock ended the day near session highs, it would be handy to take a look at the fundamentals of the business to determine if there could be any justification for this high valuation or if something was wrong. Another is happening which causes the price of the stock to jump.
BSquare Stock – technical analysis
Based on some discussion of the stocks seen on Twitter and other channels, it looks like a coordinated group of traders could be behind this latest pump in what appears to be shoddy stock.
With only around 400,000 BSQR shares traded per day with an estimated value of $ 1 million, it wouldn’t be too difficult for a group of investors to increase the value of the issue by buying options in and out of. the currency.
According to MarketChameleon data, a total of 80,500 BSQR options were bought yesterday and 59% of them were call options.
It appears that retail traders have embarked on more advanced strategies aimed at pumping the price of a stock by forcing brokers to hedge their exposure to old OTMs that become ITM options amid a sudden rise in the price of the stock. underlying title.
This strategy is especially effective for low volume stocks such as BSQR, as the increased demand can lead to severe liquidity shortages which turn into price differentials like that reflected in the BSQR chart.
The outlook for this stock is uncertain as yesterday’s rise was not triggered by a major event that could have an effect on the company’s future performance.
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BSquare Stock – fundamental analysis
BSquare is a company that distributes and markets IoT technology based on Microsoft’s Windows IoT and Windows mobile platforms. The Seattle-based company currently employs around 70 people, while its market capitalization currently stands at $ 35 million following the sharp rise in the share price yesterday.
The company’s revenue has been steadily declining since 2015 when it appears to have peaked at $ 106.6 million while it hit $ 47.1 million last year against a backdrop of sustained decline in the demand for Windows-based IoT solutions.
What’s more, gross profit margins also declined over the same period, from 19.2% in 2015 to 16.4% last year for a decline of 280 basis points as the company reported a loss. net of $ 1.9 million last year.
BSquare has consistently lost money over the past five years as it currently restructures its organizational structure to reduce operating expenses. According to management’s plans, BSQuare expects to return to net profitability by the end of 2021, although the odds of that happening are not particularly high amid the continued deterioration in the company’s results.
The company’s long-term debt closed the first quarter of 2021 at $ 1.6 million while BSquare had $ 10 million in cash and cash equivalents. From the point of view of solvency and liquidity, it seems that there is no risk of imminent bankruptcy for BSquare in the absence of significant financial commitments when the liquidity of the company seems high enough to support the company’s loss-making operations.
Excluding yesterday’s rise, the stock was already up 72% for the year as BSQR stock didn’t completely lose the gains it saw during the February retail frenzy. while it’s quite possible that a group of investors coordinated their efforts to pump up the stock yesterday. .
With a market capitalization of $ 35.1 million, BSQR is valued at 0.87 times its sales from last year. However, a third of this valuation is supported by the company’s cash flow. If we deduct this $ 10 million in cash and equivalents from the market capitalization, the price / sales ratio attributed to BSQR drops to 0.5.
Although this valuation multiple seems quite conservative, it is important to note that the value of a company such as BSquare Corporation is not particularly high because its sales come from the marketing of a product with a declining addressable market. while the company does not have any valuable intangible assets. assets such as patents or technologies that might justify the current valuation.
Meanwhile, BSQR stock is down nearly 30% this morning, possibly because insiders and those who bought the shares yesterday morning may have decided to take profit off the table.
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