Verb Stock Up 20% in October – Time to Buy VERB Stock?

Verb stock has gone up over 20% so far in October amid a sharp uptick the price experienced yesterday following news that the company suspended its agreement with Truist Securities to perform at-the-market share sales on behalf of the company.

The agreement, which dates back to 20 August, consisted of a total capital raise of up to $18 million. From that date until yesterday, the price ranged between $1.95 and $1.73 per share.

This means that the company may have sold around 10 million shares. This number accounts for approximately 16% of the firm’s weighted average number of common shares outstanding as reported in its Q2 2021 earnings release.

As a result, the company’s total cash and equivalents may have jumped to approximately $24 million. The money may be earmarked for the potential acquisition of other businesses as the management is actively looking for opportunities. Truist Securities has been appointed to identify potential targets as well.

Can this announcement result in another lift-off moment for Verb stock? In the following article, I’ll analyze the latest price action along with the firm’s fundamentals to possibly answer that question.

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Verb Stock – Technical Analysis

Verb stock has been a usual target of the retail crowd since December last year and the stock has experienced multiple sharp upticks so far this year, jumping to nearly $4 per share at some point in mid-July.

As with all “meme stocks”, retail sentiment toward the issue and other non-traditional variables need to be assessed to analyze the stock’s potential. In the case of VERB stock, its short float is standing at 8.7% according to data from Finviz resulting in a total of 4.85 million shares borrowed or around 3 times its daily volume.

As a result of yesterday’s jump, the price has broken above its 30 August lower high and this could result in a short-term trend reversal.

Data from meme stock tracker Swaggy Stocks shows that there have been no mentions of VERB in the popular Reddit channel Wall Street Bets although social media mentions have ticked higher lately.

The absence of these “social” catalysts makes it difficult to sustain a pronounced short squeeze on VERB. Therefore, even though the price may have gone up significantly yesterday the only way that the uptrend may accelerate is if more retail traders jump on board to prompt a squeeze.

Even if they accomplish that, the relatively low short float will possibly cap the stock’s advance. All things considered, the outlook for Verb stock is bullish in the very short term but any sharp spikes may not last too long.

Verb Stock – Fundamental Analysis

Verb is a software-as-a-service (SaaS) company that offers a relatively ample suite of subscription-based services for businesses including a video chat application and CRM tools.

The company’s financial results at not at all impressive for a business valued at $156 million. In this regard, sales landed last year at $10 million while the company reported net losses of $25 million.

Meanwhile, during the first semester of 2021, Verb reported total revenues of $4.9 million and net losses of $20 million.

The management has taken advantage of the meme stock craze to raise capital for the business and has raised over $30 million so far this year through the sale of its common stock.

By the end of the first half of 2021, total assets were $36.4 million and this number has probably climbed to over $50 million after the latest ATM share offering. Goodwill and intangible assets resulting from the acquisition of Sound Concepts Inc. account for at least half of that amount. Meanwhile, total liabilities stood at $22.94 million by the end of that same period.

All things considered, Verb’s current market capitalization of $156 million seems to have been significantly distorted by the actions of retail traders. The company’s balance sheet is weak and its business model has a lot to prove and nothing to show for.

Therefore, an investment in this company could lead to severe losses if its fundamentals continue to deteriorate in the future and a downturn may accelerate if the retail tailwind eventually fades.

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