Miami, Fla.-based ShiftPixy, Inc. (PIXY) provides national enterprise staffing solutions to primarily hospitality service and restaurant sectors in the United States. The company leverages the rapidly growing gig economy culture to facilitate employment.

On January 24, PIXY announced plans to develop a robust non-fungible token (NFT) gamification loyalty program set to be released this year. Under the program, customers that sign up for PIXY’s food brand ordering apps will receive custom NFTs. These can be taken into in-app games to win rewards and free food items. Regarding the program, PIXY co-founder and CEO Scott Absher said, “We intend for our brands to immerse our consumers into an augmented and mixed reality experience that will test every tradition and legacy in consumer marketing…We believe that this will show the world a high-value use case for monetizing the metaverse. As we move forward with this endeavor, we plan to increase our offerings and boost our footprint in the digital world.”

Shares of PIXY have gained 2.9% since the news of the program was released to close Friday’s trading session at $1.26. In addition, the stock gained 12.5% in price over the past month. However, it has slumped 64.5% over the past month on declining institutional investor interest.

Here is what could shape PIXY’s performance in the near term:

High Short Interest

Of its 15.61 million floating shares, approximately 3.50 million shares are sold short, indicating a 27.34% short position in the float as of Jan. 16, 2022. The number of shares held short have increased 1,264% over the past month. Approximately 28 institutional investors currently hold PIXY shares, down 11.43% sequentially. According to the Fintel IO short squeeze leaderboard, PIXY is the second most likely stock to witness a short squeeze in the near term.

Poor Financials

PIXY’s revenues came in at $8.94 million in its fiscal 2022 first quarter (ended November 30, 2021), reflecting a 257.2% improvement year-over-year. Its gross profit rose 35.5% from the same period last year to $613,000.

However, the company’s operating loss has widened 52.7% from its year-ago value to $8.58 million. This can be attributed to a 51.3% rise in its total operating expenses. Its net loss widened 25.6% from the prior-year quarter to $8.71 million, while loss per share widened 9.1% year-over-year to $0.24.

Negative Profit Margins

PIXY’s trailing-12-month net income margin is negative 106.02%, while its levered free cash flow margin is negative 38.27%. In addition, the company’s trailing-12-month ROA and ROTC stand at negative 18.58% and 99.95%, respectively.

PIXY’s negative 91.12% trailing-12-month EBITDA margin compares with the 13.15% industry average. And its 0.31% asset turnover ratio is 60.8% lower than the 0.79% industry average.

POWR Ratings Reflect Bleak Prospects

PIXY has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

PIXY has an F grade for Stability and Quality and a D for Momentum. The stock’s relatively high 1.56 beta is in sync with the Stability grade. And the company’s negative profit margins justify the Quality grade. In addition, PIXY is currently trading below its 50-day and 200-day moving averages of $1 and $1.64, respectively, indicating a death cross trend, which accounts for the Momentum grade.

Among 60 stocks in the D-rated Software – Business industry, PIXY is ranked #51.

Beyond what I have stated above, one can view PIXY ratings for Sentiment, Growth, and Value here.

Click here to check out our Software Industry Report for 2022

Bottom Line

PIXY garnered substantial investor attention following its announcement of its NFT loyalty program. However, the current crypto sell-off and increasing regulatory headwinds in the sector raise concerns regarding the success of its NFT gamification program in the long run. Furthermore, given PIXY’s negative ROE and return on sales, we think the stock is best avoided now.

How Does ShiftPixy, Inc. (PIXY) Stack Up Against its Peers?

While PIXY has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Agilysys, Inc. (AGYS), Software AG (STWRY), and VMware Inc. (VMW), which have a B (Buy) rating.

PIXY shares were trading at $1.24 per share on Monday morning, down $0.02 (-1.58%). Year-to-date, PIXY has gained 5.98%, versus a -6.23% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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