Consumer products and digital marketing company Vinco Ventures, Inc. (BBIG) sells toys, homewares, and electronics to manufacturers and retailers through e-commerce channels. BBIG’s stock has gained 168.6% year-to-date, driven by the strategic launch of 3D non-fungible tokens (NFT) on its EVNT Platform to offer a revolutionary E-NFT experience and its planned ‘spin out’ of Emmersive Entertainment as its own standalone public company.
However, the stock is currently trading 60.9% below its all-time high of $9.40. Also, its shares are down 17.7% over the past month.
While the company’s foray into NFTs has grabbed the attention of investors, we think its weak financials and negative profit margin could cause the stock decline in the near term.
Here is what we think could influence BBIG’s performance in the near term:
Volatility in NFT Market
The nascent market for non-fungible tokens (NFTs), which are digital collectibles that use blockchain technology, exploded earlier this year. However, the volatility in this budding market could spell additional risks and uncertainties for companies that invest in it. According to data analyzed by Protos, NFT sales fell sharply in the last week of May, indicating that the hype has started to fade. Since digital assets are speculative, they tend to be unstable. Although BBIG’s entry into the budding market has garnered significant investor attention, the fading NFT buzz and higher volatility could rattle investors.
Inadequate Financials
For the first quarter ended March 31, 2021, BBIG’s net revenue came in at $2.57 million, representing a 31.3% increase year-over-year. However, its operating loss increased 298.2% from its year-ago value to $10.75 million. BBIG incurred a $62.47 million net loss, compared to $1.27 million in net income in the prior-year period. In addition, the company reported a $3.28 loss per share during the first quarter, versus an EPS of $0.13 in the first quarter of 2020.
Poor Profitability
BBIG’s 28.7% trailing-12-month gross profit margin is 17.1% lower than the 34.6% industry average. Also, its EBITDA margin, ROA, and ROTC came in at negative 88.3%, 102.2%, 151.5%, and 1,199.2%, respectively. And the company’s trailing-12-month cash from operations stood at a negative $5.43 million. Its 0.5% asset turnover ratio is 51.4% lower than the 1% industry average.
Stretched Valuation
In terms of trailing-12-month EV/Sales, BBIG is currently trading at 7.74x, which is 354.4% higher than the 1.70x industry average. Furthermore, its 2.50x trailing-12-month Price/Sales ratio is 79.6% higher than the 1.39x industry average.
POWR Ratings Reflect Bleak Prospects
BBIG has an overall F rating, which translates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. BBIG has a D grade for Quality, and an F for Stability. The stock’s negative profit margin justifies the Quality grade. Also, its Stability grade indicates that the stock is more prone to volatility.
Moreover, it has an F grade for Growth. This is consistent with the company’s dismal financial performance.
Beyond the grades we’ve highlighted above, we have also rated BBIG for Value, Momentum, and Sentiment. Get all BBIG ratings here.
BBIG is ranked #70 of 71 stocks in the D-rated Consumer Goods industry. For other top-rated stocks in this industry, make sure to click here.
Bottom Line
Although BBIG’s shares have gained significantly over the past month owing to the company’s recent entry into the NFT space, the stock appears to be highly volatile given the risks associated with the digital collectibles market. In addition to that, its bleak financials could cause its shares to tumble in the coming months. So, we believe the stock is best avoided now.
BBIG shares fell $3.68 (-100.00%) in premarket trading Thursday. Year-to-date, BBIG has gained 159.85%, versus a 16.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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