by We’ll establish the number one most important thing right out of the gate before we get into this situation: This is about as high risk as stocks get. This stock just went public, is based in a foreign country, and sold 30,000% in two weeks on very low volume. Translation: Please don’t read this and go, “Wow, what a great stock I absolutely must buy!” — That is absolutely NOT what we are saying here.
Okay, disclaimer over. Let’s see what happens (HKD) .
AMTD Digital (HKD): What are they doing?
AMTD Digital is an investment banking firm based in Hong Kong that has created a digital platform called ‘AMTD SpiderNet’. AMTD calls SpiderNet a “transformational” ecosystem, and it’s currently mostly used by fintech startups and internet influencers. Oh what is this? Sounds vague you say? Don’t worry, check out the AMTD website to find out all your confusion.
Is this giving anyone Wix Free Website Builder vibes? No? Only U.S? Okay.
If the italics weren’t clear enough: we’re being sarcastic — the website’s explanation of SpiderNet is extremely vague.
What can resulting from the website is:
- AMTD provides investment banking and asset management services to clients on an international basis
- AMTD Digital Raises $125M in New York IPO – Largest IPO by Chinese Company in 2022
- It owns the SpiderNet platform
That’s really all the site explains. After a few press releases, we were able to determine that the SpiderNet platform intends to provide capital and technology to digital startups, as well as provide networking services to other digital startups. In turn, SpiderNet collects a fee from its members, where it gets almost all of its revenue.
In brief: AMTD Digital is a Hong Kong-based fintech play that essentially provides loans and services to startups in exchange for fees.
Does AMTD Digital justify quickly becoming the 26th largest stock in the United States by market cap? Let’s get a little more information on the stock before making that judgment.
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The Rise of AMTD Digital Stock
Since this tweet was released, HKD has risen to become the 13th largest stock by market cap, surpassing (WMT) – Get the Walmart Inc. report.
That’s the juicy stuff. Outside of the corners of FinTwit and Wallstreetbets, AMTD Digital is relatively unknown. We will shed light on it:
- At its debut, AMTD Digital had a fairly high price-to-earnings ratio of 18 — higher than the average Chinese fintech ratio of ~5.
- It is currently trading at $2,555.30, the P/E ratio has grown to 13,160.
- The market cap is currently 386,745 million — putting it right at the bottom (XOM) – Get the Exxon Mobil Corporation report in size and above companies like Walmart, (DIS) – Get the Walt Disney Company reportand McDonalds.
- According to a recent filing, AMTD Digital has only 51 employees.
- AMTD Digital is owned by AMTD Idea Group (AMTD), which is also relatively fast rising.
Source: Thinkorswim
- During its second year of operation (2020), AMTD Digital’s revenue grew more than 10 times.
- After this impressive growth, annual revenue slowed significantly, falling to 17% in 2021.
- In 2022, revenue growth has slowed to just 4% according to the most recent SEC filing.
- AMTD Digital operates at relatively high margins — 88% in its most recent fiscal year.
- However, the profit from its equity investments is included in the calculation of the profit margin.
- AMTD Digital’s meteoric rise has been in a context of declining volume that was already low to begin with.
After taking this screenshot, HKD increased to $2,555.30.
Summing up AMTD Digital’s (HKD) Mysterious Run.
If we were to give the shortest possible summary of AMTD’s recent run, we’d say that nothing about this run makes traditional “sense.”
- The low volume makes sense given the massive execution.
- The P/E ratio is absurdly high compared to its industry and even the rest of the market.
- The market cap makes no sense given that AMTD Digital is a company few people have ever heard of and is also (currently) the 16th largest stock by market cap in the United States.
- Revenue slowing from 10X to just 4% doesn’t justify the run.
If it seems like we’re being judgmental: We are. You should be too. The stock market can be a profitable tool for accumulating wealth, but it can also trap investors and traders who are not careful with their investments. Often, if something seems too good to be true, it probably is. In other words, as Market Rebellion co-founder Pete Najarian often says, “Discipline dictates action” — and disciplined traders do their research.
Trade smarter. Start hunting for unusual choice activity today.
