Bit Digital Inc

Bit Digital Inc (NASDAQ: BTBT) is a US-listed bitcoin Company. The Company is engaged in the business of integrating bitcoin and bitcoin mining resources globally.

Investment Highlights – Bit Digital Inc – Avoid at USD 15.39

• Despite the improved financial performance, the Company needs to manage its operating expenses more effectively unless it will increase loss in the near future.
• In the last one month, the Company delivered a negative return of ~12.85% and delivered lower returns compared to the benchmark Index.
• As per valuation metrics, the EV/Sales multiple of Bit Digital Inc is currently higher as compared to the corresponding multiple of the Investment Banking & Investment Services industry, reflecting overstretched valuations.
• From the technical standpoint, 90-day RSI is supporting downward movement (around 51 level), which means the stock price could decline in the short term.

Key Risks

• The Volatility in BTC pricing can impact the cash flows and profitability of the Company.
• Due to the impact of the covid-19 pandemic, the macro-economic uncertainties have increased and impacting the profitability of the Company.

Recent News

On 23 February 2021, Bit Digital announced that it is hosting partnerships with Link Global Technologies and Compute North to expand operations in the North American market.

Financial Highlights – Q3 and 9M FY2020 (30 September 2020) (released on 21 December 2020)

(Source: Quarterly Report, Company Website) 

• In the third quarter and nine months period of the financial year 2020, the Company remained in the development stage and generated revenue of $7.91 million and $8.60 million, respectively, from bitcoin mining.
• Driven by higher revenue, the profitability margins for the period improved. The Company reported a net income of $54 in Q3 FY2020 and reported a net loss of $4,560,786 in 9M FY2020.
• The cash balance as on 30 September 2020 increased to $521,648 (31 December 2019: $15,988).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an improvement in financial performance in the third quarter and nine months period of the financial year 2020. Both the top-line and the bottom-line performance improved, with higher liquidity. Despite the improved performance, the BTBT still remained in the development stage and is looking for additional investments. The Company is planning to finance future operations through equity financing and cash generated from operations. Cryptocurrency is highly uncertain at present; it can benefit the Company’s operations or can lead to a negative impact of the financial and operational performance. The stock made a 52-week low and high of USD 0.28 and USD 33.00, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on Bit Digital Inc at the closing price of USD 15.39 (as on 25 February 2021), and we will watch out for the benefit of an increase in cryptocurrency activity due to covid-19 pandemic.

NXT-ID Inc

NXT-ID Inc (NASDAQ: NXTD) is a Software & Computer Services Company listed on Nasdaq. The Company offers products and services for healthcare applications.

Investment Highlights – NXT-ID Inc – Expensive at USD 1.74

• Due to the impact of the covid-19 pandemic, the Company’s operational performance was significantly impacted in Q3 and 9M FY2020.
• In the last week, the Company delivered a negative return of ~28.10% and delivered lower returns compared to the benchmark Index.
• The Company has reported a negative ROE (Return on Equity) of 12.1% in Q3 FY2020. The Company’s ROE remained in the negative zone for the last 5 years.
• From the technical standpoint, 90-day RSI is supporting downward movement (around 53 level), which means the stock price could decline in the short term.

Key Risks

• Failure in cybersecurity and a critical data breach could hamper the operation as well as the reputation of the company.
• The Company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.

Financial Highlights – Q3 and 9M FY2020 (30 September 2020) (released on 16 November 2020)

• In the third quarter and nine months period of FY2020, due to lower sales of LogicMark due to the covid-19 pandemic, the revenue declined to $2,639,193 and $8,866,205, respectively.
• Due to lower revenue, the operating profit declined significantly. The Company reported an operating loss of $526,425 in Q3 FY2020 and a lower operating income of $409,655 in 9M FY2020.
• The cash balance increased to $2,092,532 as on 30 September 2020 (31 December 2019: $1,587,250).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an increase in financial performance in the third quarter and nine months of the financial year 2020. Despite the lower revenue, the bottom-line performance improved, while profitability margins remained in the negative zone. NXTD’s operational performance was significantly impacted by the covid-19 pandemic. The Company’s operations are financed through equity placing and cash balance and is facing working capital deficiency. The Company believe it has sufficient capital to sustain operations for 1 year from the filing date. NXT-ID is looking for additional financing through equity or debt to meet its working capital needs. The stock made a 52-week low and high of USD 0.213 and USD 3.44, respectively.

Based on the factors highlighted above, we believe the stock of NXT-ID Inc is “Expensive” at the closing price of USD 1.74 (as on 25 February 2021), with support from few catalysts needs to be evaluated at a later stage such as benefits of reduced operating expenses.

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