We’re going to 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 has gone 30,000% in two weeks on very low volume. Translation: Don’t read this and conclude, “Wow, what a great stock I should definitely buy!” – It absolutely is NOT what we say here.
Ok, the disclaimer is over. Let’s look at what’s going on in (HKD) .
AMTD Digital (HKD): What do they do?
AMTD Digital is a Hong Kong-based investment banking company that has created a digital platform called “AMTD SpiderNet”. AMTD calls SpiderNet a “metaverse” ecosystem, and currently it’s mostly used by fintech start-ups and internet influencers. Oh, what is it? Sounds vague you say? No worries, check out AMTD’s website to clear things up all your confusion.
If the italics weren’t clear enough: we’re being sarcastic – the website’s explanation of SpiderNet is extremely vague.
What can taken from the site are:
- AMTD provides investment banking and asset management services to clients on an international basis
- AMTD Digital raised $125 million in its New York IPO – the largest listing by a Chinese company in 2022
- It owns the SpiderNet platform
That’s really all the site explains. After digging through 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 network services to other digital startups. In turn, SpiderNet collects a fee from its members, which is where it gets almost all of its income.
Briefly summarized: AMTD Digital is a Hong Kong-based fintech play that essentially provides loans and services to startups in exchange for fees.
Does that justify AMTD Digital quickly becoming the 26th largest stock in the US by market capitalization? Let’s get a little more information about the stock before we make that judgment.
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The rise of AMTD Digital Stock
Since this tweet was released, the HKD has risen to become the 13th largest stock, passing (WMT) – Get Walmart Inc. Report.
This is the juicy stuff. Apart from the corners of FinTwit and Wallstreetbets, AMTD Digital is relatively unknown. We will shed light on it:
- At its debut, AMTD Digital had a reasonably high price-to-earnings ratio of 18 – higher than the average Chinese fintech ratio of ~5.
- Currently trading at $2,555.30, the P/E ratio has risen to a whopping 13,160.
- The market value is currently 386,745 million — placing it just below (XOM) – Get Exxon Mobil Corporation Report in size, and above companies such as Walmart, (HAZE) – Get The Walt Disney Company Reportand McDonalds.
- According to a recent filing, AMTD Digital has just 51 employees.
- AMTD Digital is owned by AMTD Idea Group (AMTD), which has also had a relatively rapid rise.
- During the second year of operation (2020), AMTD Digital’s revenue grew more than 10X.
- After the impressive growth, annual revenue slowed significantly, falling to 17% in 2021.
- By 2022, revenue growth has fallen to just 4% according to the latest SEC prospectus.
- AMTD Digital operates with relatively high margins — 88% in the last fiscal year.
- However, included in that profit margin calculation are the gains from the equity investments.
- AMTD Digital’s meteoric run has been against a backdrop of declining volume that was already low to begin with.
Summing up AMTD Digital (HKD)’s mysterious run
If we were to give the shortest possible summary of AMTD’s latest movement, we would say that nothing about this run makes traditional “sense”.
- The low volume makes sense given the massive drive.
- The P/E ratio is absurdly high compared to its sector, and even the rest of the market.
- The market cap doesn’t make sense given that AMTD Digital is a company that few people have ever heard of, and is also (currently) the 16th largest stock by market trade in the US.
- The revenue going down from 10X to just 4% doesn’t justify the run either.
If it seems like we’re critical: We are. You should be too. The stock market can be a lucrative tool for earning 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.
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