Consolidation continues in the cryptocurrency space and PI Financial analyst Kris Thompson is still seeing big things on the horizon for BIGG Digital Assets (BIGG Digital Assets Stock Quote, Chart, News, Analysts, Financials CSE:BIGG). The analyst delivered a report to clients on Monday where he maintained a “Buy” rating and target price of $2/share for a projected return of 181.7 per cent on BIGG.
Founded in 2017 and headquartered in Vancouver, BIGG owns, operates and invests in crypto businesses that support and enhance a compliant and regulated ecosystem, including Blockchain Intelligence Group, a developer of compliance, search and forensics security and accountability software, and Netcoins, an online cryptocurrency brokerage.
Thompson’s latest analysis comes after rival company WonderFi announced its intent to acquire Coinberry, a close competitor to BIGG’s NetCoins offering, with Thompson suggesting the acquisition could create significant economies of scale to the point of increasing customer acquisition costs for NetCoins.
“This acquisition does not come as a surprise as Coinberry recently abandoned plans to become a publicly traded company and investors would need an alternative exit strategy,” said Thompson, who noted WonderFi’s intent to roll up the Canadian market ahead of a possible international expansion.
The deal, which has a stated value of $38.3 million, is being made through the issuance of 29.1 million common shares, with Coinberry shareholders being subject to lock-ups of either 12 or 24 months. The terms also point to continued valuation strain in the crypto sector, with Coinberry’s acquisition coming in at about $174/user and 2.9x TTM EV/Sales, which Thompson noted to be well below the price paid by WonderFi in its acquisition of Bitbuy, which represented a 4.3x TTM EV/Sales multiple.
Presently, BIGG is trading above $1,000 per user, with Netcoins driving approximately 90 per cent of the company’s total revenue, bolstered by the addition of 11 new assets to its platform since the end of March, giving the company a treasury worth 575 Bitcoins (approximate market value of $30 million) as of April 14.
The figure also represents approximately 7.5x TTM EV/Sales, though the company is not completely reliant on Netcoins for success, as it also has a forensics and compliance business to go along with other investments, including a $10 million commitment to fledgling metaverse operation TerraZero, and an additional $55 million in cash and crypto available for investment and strategic growth.
Looking ahead, Thompson points to Newton as the next crypto platform to watch for potential movement as it waits to receive a restricted dealer license despite securing US$20 million in financing in February.
“We would not be surprised to see some of the platforms merge around licenses, as the sector becomes more regulated and commoditized,” Thompson said.
BIGG Digital Assets’ stock price has hit a few bumps to start 2022 with a 37 per cent loss since the start of the year. After a brief spike to $1.47/share on February 7, the stock has gone back down, with its lowest point of the year to date coming on March 7 at $0.67/share, which was later matched on April 12.