I'm Ready to Speculate as Decentralized Finance Heads Toward Profitability

I asked for it. I mentioned that I would be taking requests to take a look at different companies for readers. It will take some time to see my way through the requests. I thank you, the readers, for responding so quickly and for showing such interest in such a concept. I will not be able to look at a stock every day, as I have several balls in the air at any given time, but here it goes with our first name. 

That stock is DeFi Technologies (DEFT).

Who The Heck is DEFT?

DeFi Technologies is a Toronto, Ontario based financial technology company that is trying to walk the space where traditional capital markets and decentralized finance intersect. Business lines include Asset Management, DeFi Alpha, Stillman Digital, DeFi Ventures and Reflexivity Research. The company, through its subsidiaries, Valour and Valour Digital Services, is developing exchange-traded products (ETPs) that synthetically track the value of a single DeFi protocol or multiple protocols.

DeFi Alpha focuses on low-risk arbitrage opportunities within the cryptocurrency space. Stillman Digital is a provider of liquidity solutions focused on digital assets. The Reflexivity Research line of business produces research reports for the cryptocurrency industry.

DEFT was TheStreet Pro contributor Bob Byrne's small-cap pick of the year thanks to its large Bitcoin treasury.

Earnings and Analysts

The Nasdaq-listed firm is expected to report its third quarter financials in mid-November. Wall Street is looking for an adjusted EPS of $0.10 or a GAAP EPS of $0.06 on revenue of roughly $51.25 million. That would compare well to the year-ago print of $0.07 on revenue growth of 112%.

This stock is obviously not well covered. It may surprise some readers to learn that two sell-side analysts rated at five stars have opined on the stock this month. Matthew Galinko of Maxim Group reiterated a "Buy" rating as well as his $7 target price, while Michael Grondahl of Northland securities reiterated his "Buy" rating and his oddball $3.56 target price.

Fundamentals

While profitable and while sales have grown, the firm has never posted positive end-of-year annual operating cash flow. That could be changing though. The firm is expected to put profitable quarters to the tape for every quarter from the last one though the end of 2026. This year should be the firm's first year of full-year profitability since 2020.

Glancing at the balance sheet, which is out of date (December 2024), the firm did not have a lot of debt, had cash on hand of $160.8 million and total assets of $874.1 million. The thing is this: 

Total liabilities less equity came to $805.2 million, but there was hardly any debt. There was one entry labeled as "Other Current Liabilities" that amounted to $797.4 million. That was about 99% of the firm's total liabilities and they can't describe it with something more descriptive than "Other"?

The Chart

​Readers will see that this stock traded as high as $4.95 as recently as early May. The shares tried to break out of a falling wedge pattern of bullish reversal in September and that move failed. ​Now the shares are trying to break out of a much smaller double bottom pattern of bullish reversal. This pattern has a $2.30 pivot.

I see no reason not to speculate at this level given the fact that the risk/reward proposition at these prices is not awful. Just keep in mind that this is indeed speculative and that there is something on the balance sheet that they aren't that eager to accurately explain. ​

Additionally, be cognizant that we might be looking at a descending triangle pattern of bearish continuance. I see this as a minority-probability in terms of what I expect, but it is possible. I will likely add this name to my own "Stocks Under $10" portfolio after this piece is public information and you have all had a chance to read it.

At the time of publication, Guilfoyle had no positions in any securities mentioned.