MicroCloud Hologram (HOLO) stock price collapsed by almost 90% this year, making it one of the worst-performing companies on Wall Street.This decline has brought its market cap to over $147 million.
Popular meme stock
MicroCloud Hologram, a small Chinese company, has become one of the most popular stocks among day traders, thanks to its stock price and the large addressable market in its ecosystem.
The company often has substantial daily volumes, with an average of over 45 million shares. On Monday, its daily volume was over 128 million, even though the firm made no headlines.
HOLO has also become a fallen angel over the years, as its stock has plunged from $109 to $0.36. This means that people who bought the stock at its peak have lost almost everything.
There is also a risk that NASDAQ will delist the firm because of its regular non-compliance. It regularly files its reports late while the stock has remained below $1 for a long time. According to NASDAQ’s listing details, a stock must remain above $1 to maintain its place.
As such, companies that remain below $1 often engineer reverse stock splits that push their shares higher.
HOLO’s performance mirrors that of other popular meme stocks like Mullen Automotive and Bit Brother.
Mullen, a popular electric vehicle company, has seen its stock drop below $1 several times. Its market cap has dropped from over $800 million in 2021 to just $5 today.
Bit Brother, on the other hand, is a Chinese tea company that became popular when it pivoted to Bitcoin mining. Its stock often had one of the highest volume in Wall Street. Today, the company has virtually disappeared, with its market cap being less than $600k.
HOLO’s business is slowing
MicroCloud Hologram is a Chinese company that provides holographic technology, including light detection and ranging (LiDAR). It operates its business in two segments: holographic solutions and holographic technology.
These are industries with a large addressable market as the automobile industry grows. Most original equipment manufactures are considering adding lidar technologies in their vehicles. Data shows that the market size for the holographic technology will grow to $43.2 billion in 2025 from just $600 million in 2017.
Data by SeekingAlpha shows that MicroCloud Hologram’s annual revenues have dropped from over $56.4 million in 2021 to $32.2 million in the trailing twelve months (TTM). Also, it has moved from being a profitable company to one making a $24 million loss in the TTM.
The latest quarterly results showed that its revenues were $8.9 million, a big drop from the $6.9 million it made in the same period last year.
There are a few reasons to avoid the HOLO stock. First, many similar penny stocks don’t end well as we saw with firms like Mullen and Bit Brother.
Second, while the LiDAR business is growing, most participants are not doing well because of the substantial competition. A good example of this is Luminar Technologies, whose stock has plunged by 40% in the last three months and 80% in the same 12 months. Its market cap has moved from over $5 billion in 2021 to $455 million today.
The industry is also highly competitive, with the biggest players in the industry being Hesai, Faro Technologies, Bosch, and Leica. In most cases, OEM companies partner with large companies, who sell to them these technologies.
For example, Luminar Technologies has a partnership with Volvo, one of the biggest automakers globally.
Third, MicroCloud is a Chinese company that does not provide substantial disclosures to investors. A look at its investor relations page shows limited information about its operations and presentations. As such, in most cases, HOLO’s investors are doing so blindly.
Fourth, and most importantly, MicroCloud investors can anticipate substantial dilution in the future. In a recent statement, the firm said that it would increase its share capital to raise cash from investors.
Also, no Wall Street analyst follows HOLO, meaning that little is clear about its operations and forecasts.
MicroCloud Hologram has weak technicals
HOLO chart by TradingView
Additionally, MicroCloud Hologram’s shares have weak technicals. The daily chart shows that it has been in a strong downward trend in the past few months and bottomed at $0.1886.
Recently, the stock has bounced back to $0.36 as most Chinese companies rebounded after the government launched a series of stimulus package. Most Chinese firms like Nio, Li Auto, and Alibaba have all soared.
The shares have remained below the 50-day and 100-day Exponential Moving Averages (EMA) while the Average True Range (ATR) has plunged,
Therefore, the stock will likely continue falling in the coming months. If this happens, it will likely drop to below $0.10, leading to substantial losses to holders.
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