The excitement among investors around non-fungible tokens (NFT) has exploded this year, with enthusiasts spending big sums of money on artwork and other digital items. NFT systems usually rely on the Ethereum Blockchain. The NFTs are attached to brands or even people that are expected to gain in the coming years. Ranging from tech websites to TV networks, NFT’s are gaining popularity in every industry. However, there is little doubt that the latest NFT craze is fueled by speculators and not enthusiasts.
Non-fungible tokens are digital assets that represent a wide range of unique tangible and intangible items, from collectible sports cards to virtual real estate and even digital sneakers. But behind the positive picture of this blockchain game lie quite a few risks. Confusing hype, the whims of rich collectors, and the potential for fraudulent actors could add to investors’ risks in the budding space. The NFT marketplace is one which has both the potential for incredible success and catastrophic losses.
As such, we believe overvalued NFT stocks Hall of Fame Resort & Entertainment Company (HOFV), Cinedigm Corp. (CIDM), and Liquid Media Group Ltd. (YVR), which are caught up in the frenzy, should be avoided now.
Hall of Fame Resort & Entertainment Company (HOFV)
Established in 2020, HOFV is a leading sports, entertainment, and media enterprise headquartered in Canton, Ohio. The company is the result of a merger between HOF Village, LLC., a partnership between the Pro Football Hall of Fame and Industrial Realty Group (IRG), which began in 2016, and Gordon Pointe (GPAQ) Acquisition Corp.
In April, HOFV announced its first non-fungible tokens (NFTs) offering in partnership with Dolphin Entertainment, Inc. (“Dolphin Entertainment”) (NASDAQ: DLPN) and Elite Holdings LLC (“Elite Holdings”), the entity, which owns H2H. The companies plan to develop, market, promote and sell NFTs associated with the H2H Legends. The unique content should help them generate e fan engagement opportunities across their business verticals.
HOFV’s forward EV/Sales currently stands at 13.01x, 656.8% higher than the 1.72x industry average. The company’s 14.49x trailing-12-month Price/Sales is 816.3% higher than the industry average 1.58x.
Although HOFV’s revenue grew by 4% year-over-year in the fourth quarter, ended December 31, 2020, to a value of $1.8 million, it reported a $14.6 million net loss . Its adjusted EBITDA came in at a negative of $6.5 million over the same period. The stock has declined 29.8% over the past nine months.
HOFV’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which translates to Strong Sell in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HOFV is also rated an F in Stability, and a D in Growth, Value, and Quality. Within the F-rated Travel - Hotels/Resorts industry, it is ranked #19 of 19 stocks.
To see additional POWR Ratings for Momentum and Sentiment for HOFV, Click here.
Cinedigm Corp. (CIDM)
Formerly known as Cinedigm Digital Cinema Corp, CIDM is the leading independent entertainment studio in North America and is widely recognized for its film/TV/digital production, digital cinema, OTT channels, and content and marketing distribution. It operates through two segments--Cinema Equipment Business and Content and Entertainment Business.
This month , CIDM announced a digital content partnership with Genius Brands International (GNUS) for its extremely popular Kartoon Channel! The company’s content offering will be found on all the platforms currently distributing Kartoon Channel! This partnership should be an ideal deal for CIDM because it will help it showcase premium content and gain more viewers.
The company’s forward EV/Sales currently stands at 7.41x, 163.1% higher than 2.82x industry average. Its 7.37x forward Price/Sales is 288.4% higher than the 1.90x industry average.
In the fiscal third quarter, ended December 31, 2020, CIDM reported a $9.73 million net loss. Its adjusted EBITDA declined 66.7% year-over-year to $908 thousand. It reported a net loss per share of $0.07 in the same period.
Analysts expected CIDM’s revenue for the quarter ended March 31, 2021 to be $7.56 million, representing a 2.3% year-over-year decline. CIDM’s stock has declined 19.1% over the past nine months.
CIDM’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our proprietary rating system.
The stock also has an F grade for Value and Stability. Click here to see the additional POWR Ratings for CIDM. (Growth, Momentum, Sentiment, and Quality).
CIDM is ranked #6 of nine stocks in the F-rated Entertainment - Movies/Studios industry.
Liquid Media Group Ltd. (YVR)
YVR is a media and entertainment company that empowers independent IP creators to package, finance, deliver and monetize their professional video IP globally. It also offers VFX and animation production, broadcasting, and other streaming services, and distributes third-party film and TV content through its digital platforms.
This month, YVR, along with CurrencyWorks, announced that their premier Red Carpet NFT will be released in May. VRF will roll out the Red Carpet for fans through CurrencyWorks' powered NFTainment.io, a community and trading platform where fans can buy, sell, or discuss their favorite NFTs and speculate on YVR’s next drop.
YRV reported a trailing 12-month gross loss of $715.87 million and an operating loss of $8.18 million. The company’s net loss was $6.23 million, and its EBITDA came in at negative $4.22 million over this period.
The company’s trailing-12-month Price/Book currently stands at 4.55x, 65.2% higher than the 2.75x industry average. Its 655.4x trailing-12-month Price/Sales is significantly higher than the 2.07x industry average.
YVR’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, which equates to Strong Sell in our POWR Ratings system. YVR has an F grade for Value, Stability, and Quality. Among the nine stocks in the F-rated Entertainment - Movies/Studios industry, it is ranked #9.
We have also graded YVR for Growth, Momentum, and Sentiment. Click here to see them.
HOFV shares were trading at $4.10 per share on Monday afternoon, up $0.24 (+6.22%). Year-to-date, HOFV has gained 233.33%, versus a 12.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwalhas always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market.
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