CNSX: BIGG suffers rating drop from PI Financial

Cryptocurrency firm BIGG Digital Assets (BIGG Digital Assets Stock Quote, Charts, News, Analysts, Financials CSE:BIGG) still has a healthy balance sheet but the ongoing crypto winter spells trouble for the company and stock, according to PI Financial analyst Kris Thompson, who lowered his rating on BIGG in an update to clients on Tuesday.

Vancouver-based BIGG Digital, which has crypto businesses Netcoins, an online cryptocurrency brokerage, and Blockchain Intelligence Group, a developer of compliance, search and forensics software, announced its third quarter 2022 financials on Monday. The company posted gross operating revenue of $1.5 million, broken down into $1 million for Netcoins and $0.5 million for Blockchain Intelligence Group. BIGG’s Q3 sported a comprehensive loss of $1.6 million and the company ended the quarter with cash and crypto holdings of about $19.2 million.

“The crypto market has been under tremendous pressure the past two quarters, which has highlighted more than ever the need for regulation – both regulated exchanges and tools that support a regulated industry,” said BIGG CEO Mark Binns in a press release. 

“This defines BIGG. QLUE and Netcoins have long been these companies. While Netcoins Q3 2022 showed revenue contraction highlighting the tough crypto market of the summer, Blockchain Intelligence Group revenue remained steady and BIGG’s bottom line significantly improved from the previous period,” he said.

Looking at the results, Thompson said the $1.5 million topline came in under his forecast at $2.6 million as well as the consensus call at $2.4 million, while adjusted EBITDA at negative $2.9 million was also greater than Thompson projected at negative $1.2 million and the Street also at negative $1.2 million.

Thompson noted that registered users for Netcoins was up a modest 8,000 from the previous quarter to about 176,000, while ad spending dropped to $462,000 versus between $2 and $3 million for each of the past three quarters.

Thompson said BIGG’s equity investments were mixed, with the company having divested a $2-million investment in bitcoin miner Luxxfolio, which resulting in a near total loss, while its $10-million investment in metaverse company TerraZero is “looking debatable,” as the company has generated only $860,000 in revenue year-to-date versus a $30 million valuation. 

Thompson said he has downgraded his rating on BIGG from “Buy” to “Neutral” based on the likelihood of a prolonged crypto winter.

“BIGG is performing well but the FTX collapse is likely negative for new customer acquisition over the near-term and a prolonged crypto winter would be a major headwind to achieving cash flow break-even,” he said.

Along with the “Neutral” rating, Thompson dropped his target price from $0.75 to $0.30 per share, representing at press time a projected one-year return of 15 per cent.