Sphere 3D Stock Up 178% in August – Time to Buy ANY Stock?

The price of Sphere 3D stock has gone up 178% in August while shares of the Canadian developer of virtualization solutions have accumulated gains of over 500% so far this year as it has been progressively pivoting toward activities related to cryptocurrency mining.

In early August, Sphere 3D announced that it had acquired exclusive rights from a company called Hertford Advisors Ltd. to assume the operation of over 220,000 cryptocurrency mining machines in a move that should push the company’s total computing power to 5.7 Exahash.

Moreover, the deal included the lease of a 200,000 square foot facility that should supply over 1 gigawatt of carbon-neutral electricity to power this mining equipment.

Could this latest pivot toward crypto mining activity result in a significant boost to the company’s top-line and bottom-line results in the future? In the following article, I’ll take a closer look at the business to possibly find out where it might be heading after the dust settles.

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Sphere 3D Stock – Technical Analysis

Shares of Sphere 3D have been seeing above-average trading volumes in the past five sessions while trading was recently halted by the Nasdaq Stock Exchange on 30 August on a day that saw shares rise by over 22%.

Just yesterday, the stock broke above a long-dated upper trend line after a few failed attempts in a session that saw the share price rocket nearly 80.6% during the day at $12 per share to then settle at $9.4 for a 42% daily gain.

As it would be expected, momentum oscillators have been pushed to the extreme with the Relative Strength Index (RSI) reaching its highest reading since July 2020 while the MACD is surging to its highest level since November 2018.

Comment volumes about ANY on the popular Reddit messaging board Wall Street Bets have not experienced a significant surged as a percentage of the total daily comments on the forum. However, social media posts about the company have exploded after hedge fund manager Will Meade started to tweet about the company.

It seems that ANY has become the latest short-squeeze target of the retail trading army. Data from the Nasdaq exchange indicated that the stock’s short float stood at 1.15 million representing nearly 7.8% of the total float of 14.6 million shares as indicated by MarketBeat.

Other data providers have listed a lower float for the stock, possibly as the company’s recently issued shares that have not been accounted for yet.

Notably, trading volumes went up to as much as 248 million shares exchanging hands in a single day – a number that exceeded its already stretched 10-day average by more than 6 times.

Moving forward, it is difficult – if not impossible – to determine if the stock will continue to surge as there are multiple technical factors in play. Considering the significant volumes that the stock has seen, short-sellers may have already closed their positions.

However, the next option expiry date is scheduled to take place on 17 September and, given the latest rise in the stock price, brokers might be forced to keep hedging their exposure to these short-dated contracts if the price keeps rising as more and more of them will be in the money.

According to data from Volafy, put-to-call ratios are currently standing at 0.18 which means that there are more than 5 call options for every put contract held meaning that hedging requirements are probably high amid the absence of put holders.

Sphere 3D Stock – Fundamental Analysis

Sphere 3D’s revenues have progressively declined in the past five years from $76.4 million back in 2016 to only $5 million by the end of last year. Meanwhile, the company’s top-line results have remained fairly depressed this year as the company accumulates only $1.8 million in revenue since 2021 started.

During this same period, operating losses have been reduced from minus $29.4 million in 2016 to minus $5.7 million last year while net losses landed at $5.8 million by the end of 2020.

Moreover, Sphere’s share count rose from 200,000 to nearly 10.1 million while the company’s total diluted outstanding shares surged to 16 million by the end of the second quarter of 2021.

Sphere 3D has been raising capital progressively to finance its pivot toward cryptocurrency mining after merging with Gryphon Digital Mining on 3 June. Gryphon is a private company that uses renewable energy to mine Bitcoin (BTC).

The company might continue to take advantage of the positive momentum that its stock is experiencing to raise more funds to further strengthen its balance sheet. However, this would probably result in further dilution for existing holders.

The company’s market capitalization currently stands at $298 million according to data from Koyfin while its total assets stood at $15.8 million by the end of the second quarter of 2021. Its merger with Gryphon is expected to be completed by the end of the third quarter of 2021.

This latest abnormal trading activity seems to have caused a profound disconnection between ANY’s fundamentals and its valuation and investors should be aware that they can lose a significant portion of their capital by engaging with the stock at this point. So far this morning, shares of ANY are sliding 25% in pre-market action.

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