Going public via a SPAC merger in July 2020, sports, entertainment, and media enterprise Hall of Fame Resort & Entertainment Company (HOFV) had a poor debut.
However, the stock soared 256.9% year-to-date to close yesterday’s trading session at $4.39. It reached a peak of $7 on March 29, 2021, owing to its several strategic partnerships and the announcement of its entry into the non-fungible token (NFT) space. However, the company’s financials don’t seem to be promising and it might witness a pullback in the near term.
Here’s what I think could shape HOFV’s performance in the near term:
NFT Hype Might Be Wearing Off
While NFTs are not entirely new, they gained market attention over the past couple of months. This is evident from Beeple’s sale of digital artwork — “Everydays – The First 5000 Days” —for $69.35 million. HOFV’s stock also soared after it announced on March 23, 2021, that it has signed a partnership with Dolphin Entertainment, Inc. (DLPN) to offer NFTs.
However, this interest in the NFTs might be short-lived as it’s still a comparatively new asset class dependent on blockchain technology, and investors are still unsure of the real market value of the NFTs. The average price of NFTs fell by almost 70% from a peak of around $4,000 in mid-February. So, it’s a very volatile market and HOFV might not be able to generate consistent revenues just from its NFT offerings.
The company’s total revenues decreased 9.7% year-over-year to $7.10 million for the fiscal year ended December 31, 2020. HOFV’s revenues from the sponsorships segment also decreased 4.4% year-over-year and the same from the event segment decreased 49.3% year-over-year over the same period. The company’s net loss also came in at $71.49 million. Even though it was affected by the COVID-19 pandemic headwinds in fiscal 2020, its 2019 financials were not too promising.
Selling Shares to Fund Phase II Growth
On February 18, 2021, HOFV announced the closing of the sale of its additional shares of common stock at $2.45 per share bringing the total gross proceeds of the public offering to roughly $34.50 million. The company also secured a $40 million loan from Aquarian Holdings in December 2020 to repay the balance of an existing bridge loan. It is also expected to use the fund for the continued construction of Phase II of the Destination which is expected to feature a Center for Performance and the Constellation Center for Excellence, among others. However, this is an expensive project and the company has also not given any definitive completion date yet.
Unfavorable POWR Ratings
HOFV has an overall rating of D which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. HOFV has a D grade for Value as well. This is consistent with its forward P/S of 10.76x, which is 727.7% higher than the industry average of 1.30x, and forward EV/Sales of 13.28x, which is also significantly higher than the industry average of 1.68x.
The stock also has a D grade for Quality, in sync with its negative trailing-12-month gross profit margin which compares to the industry average of 33.3%. Furthermore, it has an F grade for Stability.
It has a D grade for Growth, which is no surprise as its EPS is expected to remain negative in fiscal 2021 and fiscal 2022.
Better than HOFV: Click here to access two top-rated stocks in the same industry.
The stock soared 256.9% so far this year primarily based on its announcement to enter the NFT space. However, the hype surrounding NFTs seems to be wearing off and HOFV is also in its initial building phase. So, it’s wise to avoid it now and wait until it can show significant improvement in its operations and financials.
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HOFV shares were trading at $4.18 per share on Friday afternoon, down $0.21 (-4.78%). Year-to-date, HOFV has gained 239.84%, versus a 9.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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