Why I'm Adding to DeFi Technologies (DEFT) on Weakness
Yes, this is speculative, but I'm intrigued by this crypto focused firm.
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A couple of weeks back I wrote to you concerning DeFi Technologies (DEFT), a Toronto based fintech that has been trying to create a business in the space where traditional capital markets and decentralized finance intersect. The firm's business lines, which I mentioned at that time, include Asset Management, DeFi Alpha, Stillman Digital, DeFi Ventures and Reflexivity Research.
The company is developing exchange-traded products or ETPs through its subsidiaries, Valour and Valour Digital Services, that synthetically track the value of a single 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.
Breaking Down Further
Bitcoin peaked on October 6 for the recent cycle. Since then, Bitcoin and other cryptocurrencies have sold off. That said, these assets, without really losing all that much value, look to be basing or stabilizing. The stronger U.S. dollar coming out of the Federal Reserve meeting this week obviously is not helping. Though Thursday morning's dollar strength is not apparently taking much of a toll on physical gold or silver, both have also come well off of their recent highs.
This Is the Deal
When I wrote to you earlier in October, I warned that, though I was initiating the name, a descending triangle, which is a pattern of bearish continuance, had developed, and a breakdown could ensue. That breakdown occurred on Wednesday. Take a look:
I don't know how well technicals work with stocks that trade at prices under $2, but I have added to that recently created long position on Thursday morning. Obviously, that was prior to the realization that I would be writing on this name today. My intention, due to the reduced risk and potential reward associated with low-priced names (my opinion) like this living on the margins of the digital assets industry, is to add further later on Thursday and even more later on should the shares go even lower
Don't Forget
DeFi Technologies is expected to report its third quarter financials in about two weeks. That's where the opportunity may be.
Wall Street is looking for an adjusted EPS of $0.07 or a GAAP EPS of $0.05 on revenue of roughly $46.25 million. That would compare to the year-ago print of $0.07 on revenue growth of about 91%. All of these estimates are down from when I wrote to you in mid-October.
Of the six sell-side analysts that cover DEFT, four have revised their earnings estimates lower since the start of the quarter, while two have revised their estimates higher. The range of EPS expectations runs from $0.04 to $0.19 while estimates for revenue generation run from less than zero (not kidding) to just about $109 million. In short, these guys don't know any more than we do.
Yes, this is speculative. My average point of entry is currently $1.98. That has me down 7% so far. For those about to ask, I do not enforce my 8% rule for stocks priced this low. My goal is to have an average price below $1.90 by earnings. Carry on.
At the time of publication, Guilfoyle was long DEFT equity.
