Integrated Media Technology: Don’t Touch This Stock

The headline says it all. I won't bury the lead. Shares of Integrated Media Technology Limited (NASDAQ:IMTE) have been on a rocket ship ride over the last several weeks. As of Thursday's close, shares moved up over 450% from February's closing price. With a move like that, investors might take notice and wonder if Integrated Media Technology Limited is a buy. This company now trades at 300x enterprise value to sales off a mix of news-related hype, a low float, and pure momentum. I would not be touching it up here.

What is Integrated Media Technology Limited?

There isn't actually a tremendous amount of information about this company. Even the company's own website leaves a lot to be desired in certain areas. Interested in news related to the organization? Better look elsewhere.

On the company's who we are page, the business is described in this way:

Integrated Media Technology Limited is a technology investment, product development and distribution company established in 2008, with headquarters in Hong Kong and offices in Australia and China. We are engaged in the investment, development and commercialization of visual technology with a focus on glasses-free 3D (also known as autostereoscopic 3D) display technology.

Some of the product offerings include VR and lamination glass. The stock has moved largely off a recent news piece claiming the launch of an NFT marketplace called Ouction. While I'd admit the synergies of a VR tech and NFTs seems interesting, I don't see much substance to the announcement. The stock itself has a very low float at just 3.7 million shares.

Price Action

The chart speaks for itself. For most of last year, the shares traded in a range from $4 to $5 per share. Following news of the Ouction marketplace, the company enjoyed a 185% rally that was followed by a 60% bleed off from mid-January to early March. The rest is history. Since printing a local bottom at $4.88 on March 7th, the stock has rallied nearly 600% in a straight line.

Overbought is an understatement. At two different points since the beginning of the year, IMTE shares have traded above a 90 RSI-14. The rally was only briefly in jeopardy on March 17th when the company agreed to sell $20 million in shares in a private equity offering. The valuation of those shares was $4.50 and the stock plummeted 40% intraday before ultimately recovering and resuming the trend higher.

Financials and Valuation

With a six-figure market capitalization, one might expect to see a robust revenue figure or a fast moving positive revenue trend. In the case of IMTE, we're offered neither. The revenue trend is not ideal.

Despite that large decline in revenue since 2016, costs of revenue have stayed fairly elevated. Resulting in a pretty negative gross margin story.

While not as low as the truly abysmal -744% two years ago, the current -115% gross margin is not ideal. After positive gross margin started fading in early 2017, the company has been burning cash every quarter going on four years. Shares of the company are now trading at a 300x enterprise value to sales ratio.

It doesn't get much better looking at other metrics that have traditionally mattered when trying to value a company. The point has probably landed. This is not a company that I'd call financially healthy or a stock I'd call cheap.

Where is Ouction?

The company's NFT marketplace Ouction doesn't seem to exist yet. I couldn't easily find anybody talking about it on the normal social channels where one would expect to see NFT chatter and information. Participants on the stock chat channels seem to be all focused on the price rather than anything else. Which makes sense because the only thing seemingly driving price is price itself. The company's own website shares very little information on the Ouction marketplace and provides no link to the service.

The most recent press release pertaining to the Ouction markeplace notes a 1-year NFT deal with the Wan Fung Art Gallery based out of Hong Kong. That gallery does seem to actually exist and has Google Maps pictures submitted by users to the address that is documented on the Wan Fung Art Gallery website.

It's Still a Dangerous Short

Shorting these kinds of names can be very dangerous. Just ask Melvin Capital. I do not recommend shorting stocks like this unless you are a very sophisticated trader. I have no idea if the top on this one is in yet, but I do believe it is almost certainly close.

While I recognize that I just made the opposite point regarding fuboTV as it pertains to short shares available, I think any squeeze of shorts in IMTE has already happened. Because the float on IMTE shares is so small, this is a very expensive stock to borrow and a considerably easy one to move on fairly low volume when momentum picks up.

Conclusion

As a trader, you love these kinds of stocks because you can make ridiculous returns in a very small amount of time. Unfortunately, those returns come at the expense of real people. Real people who generally are not sophisticated investors and have very little experience buying equities. It wasn't that long ago that I got my stock market education after falling for a fast moving, cash incinerator too. Integrated Media Technology Limited sold stock at $4.50 less than 3 weeks ago. You don't need to buy it at $30 today.

One More Thing

There are a lot of stocks in the digital space that I do like, however. And I'm very bullish on the NFT space generally speaking. If you're interested in those kinds of ideas, keep your eyes out for a very special offer coming soon.

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