Software as a service (SaaS) company Alfi, Inc. (ALF) in Miami Beach, Fla., utilizes artificial intelligence and edge computing to develop interactive digital out-of-home advertising experiences. With Digital out of Home (DOOH) advertising gaining traction as web browsers increasingly block cookies, the software company’s advertising platform, which is powered by cutting-edge computer vision and ML, should see increasing demand. 

But ALF’s shares have slumped 12% in price over the past month and 44.5% over the past year. The decline can be attributed primarily to investors’ concerns surrounding the company’s delay in filing its Form 10-Q, which was due last November, and the possibility of its securities being delisted.

ALF’s stock is currently trading 92.8% below its 52-week high of $22.5. In addition to the company’s non-compliance with Nasdaq’s Listing Rule, lawsuits filed against the company for violations of securities law could heighten investor anxiety. Furthermore, the SaaS platform’s increasing cash burn and negative profitability could cause the stock to experience a downtrend.

Click here to check out our Software Industry Report for 2022

Here is what could influence ALF’s performance in the near term:

Potential Delisting Concern

This month, ALF released a filing in which it disclosed that it had received a notice from the Listing Qualifications Department of the Nasdaq Stock Market LLC in November. The notice stated that the company does not comply with the Nasdaq Listing Rule because the company failed to file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, with the SEC. Furthermore, Nasdaq recently notified ALF that if it fails to file its financial reports with the SEC on or before May 16, 2022, its securities will be delisted.

Ongoing Class Action Lawsuits

Last December, the Schall Law Firm filed a class-action lawsuit against ALF alleging violations of federal securities law on behalf of its shareholders. It is alleged that the company made materially misleading statements to the market and failed to maintain appropriate controls on financial reporting. Also, Robbins LLP, Pomerantz LLP, and Hagens Berman law firm have filed a class-action lawsuit against the company on behalf of its investors for possible violations of the Securities Act of 1933 and Securities Exchange Act of 1934. Since these lawsuits could raise concerns about the stock’s near-term prospects, we think its share price has the potential to decline more. 

Inadequate Financials

ALF’s trailing-12-month EBITDA came in at a negative $10.29 million. The company’s trailing-12-month net loss was $11.44 million, while its trailing-12-month operating loss amounted to $11.37 million over this period. Furthermore, its trailing-12-month gross profit stood at a negative $578,610. ALF saw a net interest income of a negative $241,410.

The company’s trailing-12-month ROA and ROTC came in at negative 41.9% and 46%, respectively. Also, its trailing-12-month cash from operations stood at a negative 9.8 million.

Premium Valuation

In terms of trailing-12-month EV/Sales, ALF is currently trading at 389.19x, which is significantly higher than the 3.61x industry average. Also, the stock’s 506.94x trailing-12-month Price/Sales ratio compares with the 3.39x industry average. 

POWR Ratings Reflect Bleak Prospects

ALF has an overall F rating, which translates to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. ALF has an F grade for Quality and Stability. The stock’s weak profitability and volatility are reflected in these grades.

Also, it has an F grade for Value. This is consistent with the company’s higher-than-industry trailing-12-month EV/Sales and Price/Sales ratios.

In addition to the grades we have highlighted, one can check out additional ALF ratings for Sentiment, Momentum, and Growth here.

ALF is ranked #56 of 58 stocks in the D-rated Software – Business industry.

Bottom Line

ALF’s growing investments in artificial intelligence digital advertising technology have garnered significant attention. However, the concerns related to the company’s non-compliance with Nasdaq listing rules and ongoing lawsuits against the company could lead to the stock witnessing a pullback in the coming months. Furthermore, its negative profitability and dismal financials could limit its growth prospects. As such, we think the stock is best avoided now.

How Does Alfi, Inc. (ALF) Stack Up Against its Peers?

While ALF has an overall F (Strong Sell) rating in our proprietary rating system, one might want to consider taking a look at its industry peers: F5 Networks, Inc. (FFIV) and VMware Inc. (VMW), having an A (Strong Buy) rating.

Click here to check out our Software Industry Report for 2022

ALF shares were trading at $1.54 per share on Monday morning, down $0.07 (-4.35%). Year-to-date, ALF has declined -33.04%, versus a -11.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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