Specialized staffing provider ShiftPixy, Inc. (PIXY) offers access to a disruptive, revolutionary platform that facilitates employment in the rapidly growing “gig economy”. PIXY focuses primarily on clients in the restaurant and hospitality industries. The stock hit its $15.56 52-week high on May 19 following the company’s first international expansion into Canada. However, it has lost 28.9% over the past three months to close yesterday’s trading session at $2.41.

Because countless people lost their permanent jobs amid the COVID-19 pandemic, the demand for part-time jobs increased, driving  increased demand for PIXY’s services. However, jobless claims fell to as low as 13,000 in April. As the economy gradually reopens and the permanent job situation improves, the demand for PIXY’s services could decline.

Click here to check out our Software Industry Report for 2021

So, here’s what we think could shape PIXY’s performance in the near term:

Increasing Scrutiny of SPACs

On April 29, PIXY announced that the company, through a new wholly owned subsidiary, plans  initial public offerings of the following four Special Purpose Acquisition Companies (SPACs): Industrial Human Capital, Inc., Vital Human Capital, Inc., TechStackery, Inc., and Insurity Capital, Inc.

However, these latest SPAC launches come in the middle of an unusually slow period for blank-check deal making. SPACs have lately come under regulatory scrutiny. The ramping up of regulatory scrutiny of SPACs could be a concern for PIXY.

Weak Financials

The company’s revenue increased 20.5% year-over-year to $2.42 million for its fiscal year 2021 second quarter, ended February 28. However, its cost of revenue also increased 6.4% year-over-year to $2.06 million in the quarter. PIXY’s operating loss increased 41.2% year-over-year to $5.96 million. Its net loss for the quarter came in at $6.18 million compared to net income of $9.61 million in the prior-year period. Moreover, its loss per share was  $0.19 compared to $0.57 in EPS in the year-ago period.

Poor Profitability

In terms of trailing-12-month gross profit margin, PIXY’s 16.3% is lower than the 28.8%  industry average. Its trailing-12-month EBITDA margin and trailing-12-month levered free cash flow margin are negative versus  the 12.4% and 8.2% respective industry averages. Also, the stock’s trailing-12-month return on total assets is negative, compared to a 3.7%  industry average.

POWR Ratings Reflect Bleak Outlook

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

Our proprietary rating system also evaluates each stock based on eight different categories. PIXY has a F grade for Quality, in sync with its lower-than-industry profitability ratios. It has a D grade for Stability.

The stock also has a D grade for Value. This is justified given that its 5.16x trailing-12-month EV/Sales  is 133.5% higher than the 2.21x industry average. In terms of trailing-12-month P/S, its 7.84x is much higher than the 1.78x industry average.

Beyond what we’ve stated above we’ve also given PIXY grades for Momentum, Sentiment and Growth. Get all the PIXY ratings here.

PIXY is ranked #51 of 59 stocks in the D-rated Software – Business industry.

Better than PIXY: Click here to access 16 top-rated stocks in the same industry.

Bottom Line

The demand for PIXY’s services increased amid the pandemic. However, with the economy’s recovery  and improving employment conditions in the United States, the demand for part-time jobs might decline. Furthermore , the company’s financials are disappointing. So, we think it’s wise to avoid the stock now.

Click here to check out our Software Industry Report for 2021

PIXY shares were trading at $2.34 per share on Thursday morning, down $0.07 (-2.90%). Year-to-date, PIXY has declined -6.02%, versus a 11.36% 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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