These 4 Stocks Are Down BIG - Should You Buy The Dip?? | Speculative Fintech Roundup!

hey guys hope you're doing well out there it's been a while since we've done one of these industry roundups today we're taking a look at the fintech space more specifically the speculative fintech names some names we haven't covered here on the channel before so we'll take off by looking at affirm Holdings we'll then take a look at Sofi Technologies we'll jump into square otherwise known as block and then lastly we'll take a look at coinbase one of the crypto exchanges not necessarily a direct pure play fintech but does relate in that Financial space and so we'll take a look at these speculative names and look these names except for coinbase really are down huge down big year to date but that doesn't necessarily mean there isn't money to be made here because look a name like a firm you're up 63% over the past one year although you are still down huge over-year to date so keep in mind at the top of this video I'll preface this by saying these companies these speculative names should absolutely not be a huge part of your portfolio if anything they might not ever see the light of your portfolio so there's two main things to remember when investing in these speculative names first of all you need to have really really good timing because look you don't want to pick these names up when they're wildly overvalued when they're trading over 100 nearly $200 a share when the valuation simply doesn't make sense you absolutely want to stay as far away as possible from these speculative names the other thing and I'd say the other more important thing is you need to have extreme discipline when investing in names like a firm when investing in names like Sofi block and as well as coinbase because look you can get in into a name like this at what you think is a great price but what's more important is knowing when to sell and knowing when to hold because you absolutely don't want to get stuck in a stock like a firm for example at these elevated prices and have the stock continue to slide without the discipline of being able to get out when you need to so knowing when to get in and then more importantly knowing when to get out is extremely important with these speculative names and look we don't cover these names all too often and that's for a reason because these shouldn't be a Cornerstone in your portfolio they should be there to maybe supplement 1 or 2% of your portfolio if you're willing to do that but for the vast majority of investors I'd say names like these should never see the light of your portfolio and we'll get into exactly why that is we'll jump into their financials and you'll see a lot of these are just non-profitable companies that really have a long way to go before they should even be considered viable Investments especially when you have other companies out there like Visa like MasterCard like your traditional Banks like a JP Morgan or Bank of America that have far more stable and far more profitable financials that well are just more worthy of your money more worthy of your investment so keep that in mind at the top of this video that these are by far some of the most speculative names in the ftech space out there doesn't necessarily mean there isn't money to be made here but just keep in mind you have to be extremely disciplined in your style of investing when you take a look at these names now we'll kick things off with a firm holding sticker symbol afrm like we said year to date you're down 50% on this name keep in mind the short interest on the name like this is also coming up close to 10% and you'll see exactly why simply because it's been quite easy and predictable to short this name as it's been on that slide year to date now their Q2 revenues came out pardon me their Q3 revenues came out back in May so coming a bit later but revenue is coming in at right around $576 million that was still good for 51% growth year- over-year beating expectations both on the top and bottom line so this company still growing quite fast at 51% not many of these companies are growing north of that 50% clip and so look while the valuation on this isn't huge well you actually have no forward pric ear because keep in mind this company is still not profitable but we'll see from a price to sales you're actually not trading wildly expensive on a firm at this point anymore right around three and a half times this year sales and their fiscal year ending in June will end right about probably in a month from now when they release their quarterly earnings and then we look ahead to their next fiscal 2025 they're expected to put up right around 22% growth and trading around three times sales so you're not wildly overex exensive on a name like a firm at this point anymore look you're still expecting sales to grow pretty rapidly although not at the same Pace moving forward you're definitely expecting a slow down from 50% growth but look you're still expecting nearly 22% growth for the next fiscal year which still would put it at a pretty fast grower now the issue with a name like a firm is this company really isn't expected to see profitability really at any point as far as analysts are concerned you look all the way ahead to fiscal 2026 you look two years out and this company is still expected to just bleed money despite growing their revenues so rapidly this company just just doesn't have the financials doesn't have enough meat on the bone to turn those revenues into profits and that's essentially as an investor what you care about at the end of the day this company can keep printing more and more revenues as they're expected to do but if they can't turn those into meaningful profits into meaningful cash flows that they can then return to you the investor simply doesn't make sense as a viable investment and so that's the issue with a firm is you're not expecting profitability anytime soon over the next 3 years and so that's why you don't have a PE your PE is negative say simply because the earnings are expected to remain negative for the near future now Apple did end its buying out pay lader service that they created themselves after they partnered with a company like airm and so this happened back in March of 2023 as they ended their buy now payad service and partnered with installment loans through a third party app a firm as well as credit and debit cards later in that year so this was a good thing probably for a firm also probably for Apple considering they now won't take the risk of defaulting on loans that their consumers might have taken out through Apple pay later but instead that sort of risk has been passed on to a firm so this is probably a good thing for a firm in the sense that they get access to Apple's huge huge massive install base huge user base and they basically get all those consumers or all those customers willing to use their buy out pay later through iPhones and it's again probably a good thing for apple as well at the same time now what this does bring is a key risk though because down the rign if a company like apple decides to end their partnership with a firm yeah that'll probably prove to be a wild blow to a firm because then they suddenly lose a ton of those consumers now some of those consumers might remain with a firm but I'd say a vast majority of them will leave a firm's buy out pay later service simply because it's no longer partnered through Apple at this point so that is a risk moving down the line certainly a good thing at say for a firm right now because they do have access to those Apple users now from their financials you'll see there's some things to like here look your net revenues came out at $576 million for the last 3 months that is up pretty substantially what you saw up 50% year-over-year last year we were at $380 million this company also having a various streams of Revenue income so they have that Merchant Revenue which is the majority of their Network Revenue they also have a little bit of that card revenue and then the majority of their overall revenues come in the form of interest income but that is because simply because they're a Lending Service where they sort of cover the initial purchase or the initial installment for you and then you sort of pay them back in terms of that interest on your installment payment so that is majority of their income you see that did rise substantially year-over-year that saw nearly a 100% increase year-over year and so that contributed significantly to your 50% net revenue growth over the last N9 months similar story you are up nearly half a billion dollars in your total revenues you ideally would want to see a bit faster growth especially in a fintech field where there's a ton of competition just nipping at their heels you have companies like Square which we'll cover later they own after pay you also have companies like PayPal also nipping in the buy now pay later service airm certainly is your staple name in in this field but consider the fact that your Tam is probably a bit smaller than your overall Payment Processing field and so your net revenues probably can't grow nearly as fast as maybe you'd hope but still 50% growth on the top line is very solid to see now what you also have with a firm is your operting expenses continue to tick up just extremely fast you have your Provisions for credit losses nearly doubling so while you're lending out more money while you're earning more interest income on that loans you also have to take on more risk on those Provisions for credit losses because simply people might default more on those loans that they take out and so they have to put aside more and more money for those Provisions for credit losses and that's exactly probably why Apple ended their own buy now pay later service because they probably didn't find any useful meaning in putting away more Provisions for credit losses in order to take on more risk they simply probably didn't find too much value in that business and so it's probably best to pass on that risk to a company like a firm that can maybe take on that risk simply because they're more willing to you also have a tick up in your funding cost again nearly doubling year-over-year coming up to $90 million now what you did have over at a firm is a decent control on your other operating expenses like Tech and R&D ticking down year-over-year sales and marketing actually ticking down year-over-year that is a big step and then GNA also coming down right around flat on a year over-year basis so you have some controlling of your operating expenses but the ones that continue to go higher still moving higher pretty rapidly because you're expanding your top line so fast in issuing those loans you have to take on more risk and you have to account for that more risk through the provisions of credit losses and so their total operating expenses coming out at $736 million significantly higher than a year ago although relatively controlled and so you are still losing money on an operating basis you take this 576 you subtract out 736 and you're still losing $160 million a quarter over at a firm last year though you were losing nearly $300 million so this company is headed in the right direction similar story for the 9mon you lost nearly a billion dollars over the last 9 months in the previous year in the most recent 9 months you've lost really only about half a billion dollars so this company is trending in the right direction but the reason why your short interest is near 9% the reason why it's been so easy to short a name like this is simply because they haven't been profitable for a really long time and really they're probably still another year to two years out from seeing any meaningful operating profits let alone net profits they pay on some income tax and they get to a net loss of nearly $130 million again 4 a quarter that a a significant amount especially for a company worth underneath $8 billion they're losing roughly around $100 million a quarter again last year at the same time they were losing nearly $200 million so that that loss while it is coming down it's probably not coming down as fast as investors in a firm would like to see and then on top of that what you are getting is just massive amounts of stock dilution as this company simply needs to fund their employee payments one way or another now from a balance sheet perspective not looking overly concerning you do have roughly $1.5 billion in cash and restricted cash and then you still do have a little bit of funding debt right around $1.6 billion in funding debt and then your convertible senior notes this is sort of your long-term debt right around $1.3 billion so not actually the best balance sheet you can find out there especially for a company that's in the business of lending out money and on the business of issuing loans especially they do take on a ton of risk and so this company could certainly have a better balance sheet from that perspective but still not overly concerning especially from the perspective that they're bringing down the net losses and maybe at some point they can flip to an operating operating profitability and from that perspective that will certainly be helpful for this company from a net loss again for the last N9 months you lost nearly half a billion dollars improvement from 2023 but simply not good enough and then on top of that you get to add back a fair amount in stock based compensation nearly $300 million in the most recent 9 months again that is an improvement from a year ago the worst thing we would want to see is this company handing out more stock-based compensation than a year ago but keep in mind the stock is also roughly 61% higher than it was a year ago and so that less stock based compensation simply could be due to the fact that your stock is now worth 61% more and so you get to add back a ton of line items like that and you get to positive operting cash flows right around $381 million so from an operating cash flow perspective not actually overly bad especially if you annualize it you get too close to half a billion dollars in operating cash flows and look that's significantly better than we were a year ago so if you look maybe a a year or two years out this company can maybe start generating meaningful operating profits to the tune of maybe a billion dollars to2 billion sometime in the near future but you're still a ways away from that this company still needs to control something like stock based compensation if they want to get to a point like that because look if you take this 381 million and you add back that stock based compensation then you're basically right around Break Even from an operating cash flow perspective so sure while this isn't cash leaving the business the employees over at our firm simply won't work for free and so that still is an expense leaving your business and from an operating cash flow if you add that back in you're basically right around Break Even despite again growing your net revenues nearly 50% for the most recent quarter now this company doesn't leave them with a ton in order to do something like a buyback or a dividend and so they simply reservice those loans and repay some of those loans and that's simply all they can do for now this company is still a long way away from being a staple in the form of a buyback or dividend they're simply nowhere near that and so from that perspective they need to continue to have this really rapid Revenue growth and as we see that is expected to slip over the next couple years and yeah simply that won't be good enough for this company despite having that valuation be shaved off so heavily in the recent past the operating losses continue to Mound and this company until it turns to profitability I think is a pretty simple no touch at least for me now from a technical perspective the reason why it's so easy to short a name like this in the recent call it 6 months is because it's been a very predictable downtrend of lower high high and lower lows so anytime you come up close to the top end of this range near I'd say close to $30 is probably when you either take your profit if you were looking to swing it from the bottom end of this range or you continue to short it as it's probably expecting to head lower now with shorting a stock like this I'd be very careful because you certainly could have news that a company like apple partners with it and that could shoot the stock up especially with the short Interest being so high you could experience little bit of that short squeeze and so with a name like this again I'd say be very disciplined when you're playing it on either end really if you're looking to short it I'd say it's easy to get greedy with a name like this but at one point you have to exit your short and maybe realize the value is becoming overly cheap in a name like this and certainly I would expect that to happen as it continues to head lower maybe right around somewhere close to $17 a share that is where level of support has been found on this name has been bouncing off that point for a couple of times in the past and so I expect this one to continue in its downtrend probably heading close to the $17 range now in the meantime you can expect to play these boun say if you really want if you want to swing this one you can pick it up near the bottom end of this range actually close to where it is right now and you can play a swing up close to the top of this range that could give you a gain of right around 10 to 15% so not an overly exciting risk reward trade but you could look to swing these stocks in their downtrend Channel but I would again be very careful in where you set your stop losses and be sure to have a disciplined entry and exit point when playing names like this from a long-term perspective you are still relatively in an uptrend of making higher highs and high higher lows although that's not as intact as it once was because you have broken through that level of support that you should have expected near that $30 range so from a technical perspective this one really has been in the dumps you still have probably people sitting in the stock from a long time ago some of them are profitable and as this one continues to head up yeah those people will look to take their profits continuing to put selling pressure on this stock and then on the other side you don't have this company being able to buy back their own shares and so that certainly could provide no support for a name like this until firm becomes profitable from an operating perspective I think this one is a no touch and still a long way to go now next up we're taking a look at Sofi Technologies ticker symbol Sofi you're to date you're down more than 33% on this name and keep in mind the short interest continues to stay elevated at more than 177% now your net revenues in the most recent quarter came in at $600 million that was good for 22% growth year-over-year beating expectations on Wall Street so look while 22% growth year over year is pretty good I'd say it's certainly not grade especially for a name that's trading nearly 70 times a forward earnings multiple so you're just not getting the same break neck growth that you've once gotten with Sofi and probably once you've expected with Sofi now what's more exciting with a name like Sofi I'd say is that they're flipping to profitability and that is on a gap basis as they posted a 1-cent beat and posted Gap EPS of right around 1 cent so this company is still while basically on a break even course they're at least flipping to profitability something a firm still has a long way to go in order to do now from a revenue growth perspective you're also expecting a Slowdown in your Revenue growth as you have nearly 19% growth in this most recent year and then you're expecting that to come down to 15% growth in fiscal 2025 so from a revenue growth perspective simply not that great anymore over at Sofi now what you do get with Sofi is earnings growth as this company like we said is just now flipping over to profitability and if they can continue to maintain those expenses while continuing to grow those revenues even just at that mid- teens to maybe 20 % clip this company has a long way to go but certainly can get there from a profitability perspective as your forward price earnings right now is trading close to 70 times does have the ability to come down as we see into 2025 nearly 30 times if for priced earnings that's on the basis that's this company will earn nearly 25 cents a share now certainly you have a wide range of estimates here on Wall Street ranging between 11 cents up to 36 Cent so there's some level of unpredictability with this business and certainly that comes from the fact that they're basically becoming a digital bank but the bull case is if this company can continue to move in the right direction towards profitability you probably have some room for upside with a name like sofa and so from that perspective if you're still shorting this name I'd be very careful in continuing to short a name like this because if they can continue to post more quarters of Gap profitability that is probably a reason for you to exit out of your short position rather than continue to hold it now from their total net revenues that came in like we said nearly $600 million they do have a certain amount of net interest income so that's basically due to the fact that rates have been higher over the past year compared to that they were back in 2023 and so you have nearly $400 million of net interest income earned and now keep in mind as the FED begins to lower interest rates maybe you see some offsetting in lowered interest income but keep in mind that could be offset Again by the fact that you have probably more people willing to take out loans through firms like sofine so they might see an increase in loan demand overall and so probably this net interest income I'd say would actually probably Faire better in a lower interest rate environment and I guess we'll take a look at that over the next couple of quarters as interest rates begin to come down now this company also has a little bit of non-interest income that's through loan origination also servicing and then their technology products and solutions and so total revenue like we said at $600 million Higher by nearly 20% you over the last 6 months you're in a similar Trend up to nearly $1.2 billion on your net revenue last year you were closer to a billion dollar on that side now this company does have a fair amount of operating expenses that they're still looking to keep in check but ticking up nicely now your technology and product development coming in at 132 million sales and marketing ticking up it's not actually a whole lot despite how much you raised your top line by cost of operation staying relatively flat up to $19 million GNA taking up to 145 and then you have little bit more in Provisions for credit losses and so your total non-interest expens coming in at 583 million so we take this 598 million of total net revenue we subtract off 583 and you're looking at right around $17.4 million in net income so you're looking at very very slim operating margins for this business at least at the current time but I want to compare that to what it was a year ago where you were losing nearly $50 million a quarter you've now flipped that to profitability gaining nearly $17 million in the most recent quarter over the last 6 months actually paints quite a nice picture as you you've earned nearly $100 million in bottom line net income compared to a loss of close to $80 million in the same time last year so for a company valued right around $7 billion while this is still just a minuscule amount of profitability and the margins are simply not that great this company does at least have a way to go in terms of ramping up that profitability now if you expect that they can continue to do that that is the bull case you're making over at Sofi as this company is continuing to gain more customers continuing to upsell them in different types of products and if those customers can remain with Sofi over an extended period of their life yeah then this company certainly has a ways to become a I'd say more larger scale financial institution probably not to the level of a JP Morgan Chase but could be getting up to a tier just below those major financial institutions now from an operating cash flow looks actually quite well as you have nearly $100 million in net income that's over the last 6 months you get to add back some depreciation some share based expense of nearly $116 million so this company is actually paying their employees more than they're earning in bottom line profitability now what I do like to see is year over year that is down so despite actually increasing substantially on their net income this company paying out those stock based compensation expenses actually less over the last year so that actually is something I do like to see so your total operating cash flow is coming in at $253 Million last year you lost nearly $4.3 billion over the course of six month so this company certainly flipped quite substantially towards operating profitability again from that cash flow perspective now they simply don't have a ton of use for that so they do a bit of capex to the tune of right around $69 million and then the rest they sort of use towards the purchase of available investment so they don't have a ton of use for that operating cash flows at least at the current time this company is still doing a fair amount of dilution so what you would like to see is down the line if they're able to generate meaningful amounts of operating cash flows at least offset that dilution in the form of a stock buyback as this company simply is diluting you extremely fast from your shares and so while nearly $200 million of free cash flow is not a significant amount yet if this company continues on a trajectory of posting operating profitability quarter in and quarter out yeah they could simply be on their way to generate a meaningful amount in free cash flow at least over the next couple of years now from a stock chart perspective the reason why it's been so easy to short a stock like Sofi is because it's been locked in a pattern of lower highs and lower lows similar to a firm this company sort of had that blowoff top right near the IPO where it traded as high is nearly $24 $25 a share now we're seeing it come down back to Earth I'd say closer to $664 again your market cap is right around $7 billion and so for this company earning close to 600 million a quarter in Revenue while from a sales perspective it's not overly concerning while this company still is just eeking out minuscule amounts of bottomline profitability you're forward priced earnings still looking extremely rich and so from that perspective you do have a long way to go in terms of gaining that operating leverage over at sofa and flipping to profitability I'd say again in a meaningful way you still have a ways to go now you have some levels of support with this name down in the $5 range at that point you don't have a lot of institutional buyers stepping in picking a stock that's close to $5 a share and so from that perspective you also have a lot of retail investors in a name like this where your large institutions are probably staying away until the stock shows meaningful profitability but also comes up to maybe a level where it's not a single digigit stock simply from a safety perspective and so from that perspective I'd say this downtrend channel should stay intact with Sofi until they show couple of quarters of meaningful profitability once you get that and once you get a breakout I'd say higher than $9 which look still is a long way to go from where we are currently and that's certainly nearly a 50% gain and so you could look to play this as it continues to move higher if you want but again set that tight stop loss so you don't get stuck in a name like this at a price where it continues to head lower but certainly if it breaks out over $9 a share and then maybe back test to the top of this channel that could be a indication of shares of Sofi reversing and continuing to head higher so until it makes that technical reversal until it continues to post at least meaningful profitability on a consistent basis from their results I'd say this one again is probably not a touch for me but if you are looking to swing this one could make sense to maybe pick up near the bottom end of this range and trade it up to the top so that was my take on shares of Sofi one I'd still say is a couple of quarters away from showing that they can consistently post operating profitability next up we're taking a look at block otherwise known as Square this one is not as speculative as a name like Sofi as a name like a firm you do have a bigger market cap close to $40 billion on this company but year to date you are down nearly 20% over the past one year you're roughly flat as a lot of names including the S&P 500 simply has gone higher you haven't seen that appreciation with a name like block now keep in mind this is a jack dorsy Leed company and for the longest time this company simply was either a loss leading company or simply running at a break even but now what you're getting over at square or block is this company controlling those costs which is the biggest thing for a name like this and then turning to again an operating profitability which is something that investors certainly including myself would like to see now Revenue growth came in at 11% year-over-year at $6 6.16 billion so this company is posting meaningful revenues but the growth of those revenues simply aren't good enough especially when you're expanding your costs at a relatively fast clip now as this company controls those costs yeah this Revenue growth will at least be more meaningful towards generating more profits now that did Miss estimates on Wall Street but you also got a beat on your bottom line non-gap EPS of nearly 93 cents so this company also raised their F year outlook to reflect the outperformance in that second quarter and then improved expectations for the remainder of the year and I think the big thing what investors want to see with a company like this is they continue to expand those adjusted operating incomes nearly at $1.44 billion with a close to 16% margin so over the next couple of years the revenue growth over at block really is expected to be in that mid to low teens and they certainly don't have a huge price to sales premium for that but keep in mind that a lot of this revenue is derived from Bitcoin which is basically on a break even basis really no margins to that Revenue stream you also have a hardware Revenue stream which they are losing money in and so while this revenue does look like a lot on the surface it's quite low margin when you get down to the nitty-gritty now from a bottom line perspective you are still expanding your earnings by nearly 100% in this most recent fiscal year up to $354 and then as you look ahead the estimates on Wall Street really have a very very wide range as the low end is near $315 the high end is close to $6 30 cents and so you have a significant amount of variance in what you actually expect the bottom line profitability over at block to be in the next couple years and so if you certainly have the expectations that the average analyst estimate is correct then yeah from a valuation perspective you're actually not trading overly expensive but certainly if this company once again slips in how well they control those operating expenses and again falls back into the Trap of losing money from an operating perspective then those earnings and those earnings multiples will continue to move higher really making the valuation look not as cheap as it does right now now like we said this company having a certain number of revenue streams the transaction-based revenue this is I'd say decently margined as you have $1.7 billion and that took you nearly $1 billion in cost to generate so you have pretty good margins on that side you also have the extremely good margin business on the subscription and service based Revenue stream nearly $1.8 billion in Topline revenues which cost just $300 million to generate what's also great to see is that is also your fastest growing Revenue segment over at block as this company just is heavily riant on that business unit to generate the majority of those gross profits now your Hardware Revenue coming in at $43 million that they basically give away for free as it cost them nearly $68 million to generate that's not really a huge point for Block that's simply to get customers and I'd say Merchants into the door to use their actual subscription and transaction based revenue and then you have Bitcoin Revenue coming at $2.6 billion the cost of that relatively in line 2.5 so again they're just scraping off a little bit on the service of that Bitcoin transactions but they're not making a meaningful amount in gross profit from that side of the business and so you have nearly 3.9 billion in the cost of revenues of nearly $6.2 billion and so you have gross profit right around $2.23 billion pretty good from where you were last year as you were closer to $1.86 billion and again over the last months you're up to $4.3 billion in gross profit so that gives them a fair amount to spend in terms of operating expenses they have product R&D which again coming in at $700 million is up year-over-year but then you controlled your sales and marketing quite nicely down to 507 last year you at 537 million GNA also ticking down to 473 million and then you have some transaction loan losses that they have to put aside and then some amortization of customer assets and so you get to total operting expenses of $1.9 billion that is actually down from a year ago despite earning more in gross profit and so that's the reason why this company is able to flip to an operating income of nearly $300 million last year they were losing close to $130 million so despite showing nearly $6.2 billion on the top line they get to eek out just $300 million in operating income so the margins on this business are frankly quite low considering their whole Topline net revenues now keep in mind a lot of that is Bitcoin Revenue some of that is also Hardware Revenue which they basically give at a break even cost so I'd say the thing to consider is the transaction and then the subscription based revenues for block and then the margins they can squeeze from those businesses is really what should drive this company forward and really that's the valuation you should base things off of certainly wouldn't value this company based on their Bitcoin revenues because yeah there's absolutely no margins in that side of the business and so this company can only really be profitable if they control those operating expenses really really well those are the levers that this company has got to pull similar I'd say to a PayPal where if they can control those operating expenses yeah that's the only way that they can generate meaningful amounts of operating income because you aren't seeing explosive Revenue growth anymore over at this company you're just seeing mid teens growth into perpetuity and so the only way this company has the ability to grow is if they can control those expenses now what they aren't controlling is the sharebase compensation as you're still diluting the shareholder pretty rapidly as you have shares taking up on a year-over-year basis from their balance sheet perspective not looking overly concerning you have nearly $8 billion in cash in cash equiv that's actually significantly higher than same time last year but at the same time you also have some long-term debt close to $5 billion that did increase your year as last year you were closer to $4.1 billion so this company taking on a little bit more debt continuing to dilute you simply because they haven't been profitable for a very long time and so they're just now flipping over to that operating profitability we get to cash flows out of $660 million that's on a net income basis over the last 6 months that turns into nearly a billion dollars in operating cash flows and just notice how much they pay in share based compensation nearly 631 million do in stock-based compensation so nearly all of the amount they earned in their net income they pay out in the form of stock-based compensation so if you actually subtract this out of your operating cash flows you get to very minuscule $400 million in operating cash flows over the course of 6 months again $400 million for a company valued nearly $40 billion so even if you annualize it you're looking at $800 million in operating cash flows for a company again worth nearly $40 billion on top of that you're not getting a dividend you're not getting a buyback you're really not getting any of the things that you get from some other fintech names let alone some other financial institutions like JP Morgan like Bank of America and those companies now what this company remind remind me of is very similar to PayPal where you had that blowoff top you had people get stuck in this name close to $250 $260 a stock and then as the growth rate slipped so did the stock as this one came back down to earth now trading in this range I'd say between $50 up to $85 that's really where it's been range bound since call it back to 2018 as this company over the past five to 6 years really hasn't done much with your money especially if you picked it up in this range if you picked it up at this point then you're probably down either either substantially or you probably had to sell for a loss at one point or another so with a company like block what I would do is probably set a stop loss underneath this $50 range and probably play these swings up because this is quite a wide range as you have nearly a 60% swing from the bottom to the top of this range so if block can come down close to $50 yeah you could look to pick up maybe a couple shares at that level and then look to play the swing higher to the top end of this range near $85 to $86 a share now with that strategy what's really important is you set a very tight stop- loss because if this breaks this $50 range you're probably headed back down to the 40s if not lower and certainly at that point the news will be ugly for a name like block and what you can do maybe if you pick it up at this range is peel off some of your position at the $60 range peel off some at 70 and then some at 855 if it gets there because no guarantee block shares continue to move higher within this range and they can certainly reverse halfway up into the range and so at that point you do want to lock in some profits and that's really the name of the game with stocks like these the speculative fintex is lock in your profits and cut your losses when you can because you simply don't want to be stuck in names like this for too long now what you ideally want to see if you're long this name is this company break out over this $90 range and then you have a back test to this $85 support and that's when this shares can continue to maybe move higher maybe set up a longer term uptrend but until that point I'd say shares will continue to trade sideways within this pretty massive range and that's probably the play where I would look to pick up and sell shares of block is on swings higher from call it $50 a share last but not least let's take a look at coinbase stock de simple coin this one is I'd say more reliant on bitcoin prices more reliant on crypto prices overall because you do have some ethereum you do have some salana traded on this exchange and so overall however the crypto Market goes however Bitcoin goes I'd say that's how coinbase will go and so your to date you actually have seen a 133% rise in your shares over the past one year you're up nearly 130% so with a name like coinbase the timing again is very important on when you get in and when you get out certainly with a name like this you need to have the discipline to lock in your gains and also cut your losses when you can because certainly con coinbase is a volatile name simply because that's how the crypto markets and the nature of the crypto markets really is now your revenues came in at 1 a. half billion that was good for nearly 105% growth year-over-year beating estimates on Wall Street which you did see a disappointment in is your Q2 Gap EPS at that came in at 14 cents estimates were higher by nearly 78 cents you had a big Miss on your bottom line profitability and what I want to point out with a name like coinbase is simply how unpredictable a company like this is as you have estimates on Wall Street expecting nearly 85% growth for this fiscal year and then we look ahead they're expecting no growth next year and then they're actually expecting revenues to decline in the next couple of years and I'd say Beyond 2025 you're just absolutely guessing what revenues for coinbase will look like because this company is so heavily reliant on what the crypto Market does which is probably one of the most unpredictable things out there that makes their revenues simply one of the most unpredictable things out there because again you're expecting a wide range in your revenues as the low end is nearly $3.74 billion and your high end is closer to $8 billion in terms of Wall Street estimates I'd say that really translates onto your net income as again you can expect nearly 1, 1400% growth in your bottom line profitability one year and then the subsequent year you're expecting earnings to decline by nearly 15% so that large degree of unpredictability I think makes the stock not just difficult to Value but also difficult to invest in because at any given point you don't really know what the next 12 months look like especially from a valuation perspective from an earnings perspective from a revenue perspective because simply if the crypto markets if the price of Bitcoin simply continues to tank well then coinbase as a company as an exchange will simply not do that well because people wouldn't want to trade those crypto assets anymore and so that is really what this company is dependent on makes it very hard to value and very hard to predict what their financials will look like so in the most recent quarter you have that $1.5 billion in net revenue again year-over-year is looking fantastic but I believe quarter over quarter this was a decline so again that bodess to the unpredictability of this business now you have that transaction expens SP ticking up to $191 Million last year you were close to 108 you also have Tech R&D ticking up sales and marketing nearly doubling on the fact that you're doubling your revenues that is okay but certainly if your revenues begin to slip and maybe begin to Trend in the wrong direction will this company be able to control those sales and marketing expenses just as fast as their revenues begin to decline that is the question you have to ask now GNA also continuing to tip up and you have your total operating expenses coming out at 1.1 billion so you take this 1.45 you subtract off 1.1 you get to operating income right around $350 million last year you lost nearly $73 million in the most recent quarter and so this compan so heavily riant on how their net revenues go and simply because their net revenues are so unpredictable based on the price and the fluctuations in the crypto markets I think makes their operating income and operating losses certainly is hard to predict I'd say more than a couple of quarters out at the very best now what you also do have with this company is again stock-based compensation and they're continuing to dilute you this diluted shares came up to 266 Million last year you were at nearly 234 million so dilution really is a problem for all of these companies all of these speculative names now from a balance sheet perspective coinbase looking relatively good as you have nearly $7.2 billion in cash and cash equivalence another little bit in restricted cash in terms of your total longterm debt coming at $4.3 billion is actually significantly higher than you were this is on a six-month basis so 6 months ago you were nearly $3 billion in long-term debt that is now up to close to $4.2 billion so from a balance sheet perspective not looking overly concerning but keep in mind this company is heavily rying to get on those consumer deposit on those customer deposits of those crypto assets of their money and so if customers begin to pull money out of the coinbase system then this company from their balance sheet will certainly not look that good they'll also continue to have to pay those customers and while this company is regulated and probably won't go the same way as an FTX or maybe a binance did there is some levels of stress that a company like coinbase can experience when customers begin to pull their crypto assets off this platform at a relatively fast clip so again that is a huge risk with a name like this you're essentially investing or betting on the crypto markets being relatively healthy as you invest in coinbase now your net income came in at $1.2 billion that is for the last 6 months you get to add back again a lot of stock based compensation nearly 442 million and then you get to net cash provided by operating activities read Around $900 million from that they do a little bit of buying and selling in terms of crypto assets and so this company taking their operating cash flows and simply investing it in the crypto markets doesn't really seem all that useful to me if I wanted to invest in the crypto markets I would do that myself I wouldn't really put my money in coinbase and have them do that for me and so what I would rather see this company do is take that cash flow put it back towards a buyback maybe put it back towards a dividend but this company simply isn't as predictable to pay a dividend and so I'd say that's probably the reason why they don't do something like a dividend payment and they'll continue to spend money in the form of buying and selling crypto assets and well yeah that's probably beneficial to themselves but also continuing to bet on the crypto markets just not something I'm at least willing to do at the current time you also see them take out nearly $11.25 billion in convertible senior noes so they're taking on more debt as this company despite this company really being profitable they're needing to fund that profitability in the form of issuing more debt because they continue to invest in those crypto assets rather than really invest in themselves or do something like a buyback for their shareholders now from a technical perspective this one is actually probably positioned the most uniquely when compared to the other names because you are actually within an uptrend heading you back to probably at some point taking you back near your all-time highs near 200 if not $300 a share so if this company can continue to put up these quarters of consistent profitability which is pretty hard to in a crypto industry where it's quite unpredictable to know what your revenues over the next 12 months will look like but if for some reason they're able to control those expenses in case Revenue slips and continue to grow those operting profits in case Revenue explodes yeah this company will continue to head in this uptrend now from a technical perspective what I would do with shares of coinbase is pretty much play this uptrend to a textbook T so if it comes down to the bottom end of this range I could maybe pick up one or two shares setting a height stop loss on underneath that point and then expect to play the rally near the top of this range because you do have a large amount of Delta between the bottom and the top end of your range nearly 100% Delta in that channel and so this company certainly has the ability to move widely and swing widely basically based on those crypto prices and Bitcoin certainly having done relatively well over the past year has voted well for the exchange that is coinbase and so as long as the Bitcoin prices ethereum prices crypto prices overall remain relative healthy as long as the trading volumes especially on those assets can Rel remain relatively healthy this company can continue to trade in this channel of higher highs and higher lows and as it gets to the higher end of this range that's when you take your profit certainly at the middle end of the range is also another level where you can continue to peel off your profit simply to lock in some gains because if you don't lock in some gains during uptrends in a stock like this you could be trapped on a huge decline especially if the crypto markets do end up going into a bare Market at some point or another especially while the equity markets have done relatively well that has also supported a stock like this anytime you see the signs of a recession you'll probably have some funds being taken out of crypto assets because simply they're quite risky and so in that case you'll see some pressure on an exchange like coinbase that was my take on shares of coinbase that was also my take on a bunch of other names like block otherwise known as Square we took look at Sofi Technologies we also took a look at airm Holdings pretty speculative names companies that continue to dilute you these shareholder companies that really don't have a buyback don't have a dividend in place they continue to be shorted simply because they're quite easy short candidates because they're quite unprofitable and lose money and continue to Trend down from their technical so when investing in names like this I would do a couple things I would limit your risk or overall exposure to names like this by limiting just maybe 1 or 2% of your overall portfolio the majority of your money should be in consumer staples should be in highly predictable well Diversified cash flowing assets like the names we cover here on the channel if you are interested in the fin Tech space companies like Visa like MasterCard American Express and then your traditional Banks like JP Morgan Bank of America those are probably the names you want to be in rather than being in names like a firm like Sofi like square and like coinbase while you still can make money in names like this it's very very hard to do so you have to be extremely correct in when you buy and sell stocks like this you also have to have extreme discipline in knowing when to get in locking your gains and then also getting out in case you need to cut your losses so those are some things to keep in mind that was my take on shares of a firm coinbase block and Sofi let me know your thoughts on this one in the comment section below as always thanks so much for watching and I'll catch you guys in the next video