China recently announced that it is halving its tax on stock trading effective Monday, August 28th in an attempt to boost its stock market. This announcement could have major implications for Chinese stocks since Chinese ADRs tend to run along with their stock on the Chinese exchange. One of the Chinese stocks that may run this week is FingerMotion, Inc. (NASDAQ: FNGR) given its popularity among traders thanks to its naked short squeeze potential. In light of this, FNGR stock could be an extremely profitable swing trade this week.
FNGR Stock News
FNGR is a telecommunication specialist that offers a wide range of products and services. At present, the company offers mobile phones and complementary services such as data plans, loyalty points/redemption services, and subscription plans. As a telecom specialist, FNGR stock could be poised to run as a result of China ending its tech crackdown.
Bullish Fervor
In late 2020, China started its multi-year regulatory overhaul of Alibaba Group Holding Limited (NYSE: BABA) which developed into a crackdown on Chinese tech companies. However, that crackdown appears to have reached its end after the Chinese government fined BABA nearly $1 billion. While one would expect BABA stock to fall as a result of the fine, the opposite happened with BABA stock climbing 9.1% due to the bullish sentiment regarding the end of China’s tech crackdown. This bullish fervor might be a prelude to an industry wide catalyst that could result in Chinese tech stocks including FNGR to run over the course of this week.
Possible Short Squeeze?
A reason FNGR stock could be a prime candidate to run this week due to this catalyst is its short squeeze potential. In late 2022, FNGR launched an investigation into naked short selling that might be occurring in the stock and hired ShareIntel, Christian Levine Law Group, and Warshaw Burstein to oversee the investigation.
The fact that FNGR went through the trouble of hiring these institutions means that there could be a high probability regarding the legitimacy of its claim. If these allegations are true, the stock may soar as a result of a short squeeze due to the end of China’s tech crackdown and its low float of 39 million which makes the stock move quicker on volume.
*Updated August 8th, 2023
China’s Tax Cut
Looking to boost its stock market and bolster investor confidence, the Chinese government decided to decrease its stock trading tax by 50% from .1% to .05% on August 28th. According to Xie Chen, a fund manager at Shanghai Jian Investment Management Co, this tax cut is set to provide a short-term boost to Chinese equities, however, such a boost will not have much effect in the long run. That said, a short-term boost may be what FNGR stock needs for a naked short squeeze to occur as it may witness higher than average volume. For this reason, FNGR stock is one to watch closely this week.
FNGR Stock Financials
2022 Annual Report
According to FNGR’s 2022 annual report, the company’s assets increased significantly from $10.36 million in 2021 to $17.54 million in 2022. This drastic improvement in total assets was reflected in FNGR’s cash balance which also increased from $461.9 thousand to $9.24 million. It is also worth noting that FNGR’s liabilities decreased during that time from $5.27 million to $4.57 million. Given that the company’s cash balance far outweighs its total liabilities, FNGR is in a strong financial position.
In terms of revenues, FNGR experienced an increase from $22.9 million in 2021 to $34 million in 2022. Having said that, the company’s operating expenses increased from $7.68 million to $8.98 million which could be attributed to the company growing its operations. In light of this, FNGR’s net loss increased YoY from $4.9 million to $7.5 million.
Q1 2023
According to its Q1 2023 report, FNGR’s assets decreased QoQ from $17.5 million to $14.5 million mainly due to its cash balance falling from $9.2 million to $5.4 million. This drop in cash is mainly the result of the company’s cash burn since it burned through $2.5 million in operating cash flow in Q1, as well as repaying $1.1 million in convertible notes. As for its liabilities, the company witnessed a decline from $4.5 million to $607 thousand thanks to accrual and other payables falling from $1 million to $453 thousand.
When it comes to revenue, the company experienced a significant YoY growth, increasing from $4.8 million to $12.1 million. This growth was a a result of its telecommunication products and services which generated $12 million in revenue in Q1. It is however worth noting that in Q1 the company’s cost of revenue was $11.5 million which meant that it only generated $662 thousand in gross profits. That said, this figure is a YoY increase from the $377 thousand it reported in Q1 2022. Expenses, on the other hand, remained relatively the same at 1.8 million. As a result, the company’s net loss decreased YoY from $1.4 million to $1.2 million.
Media Sentiment
@RealAvidTrader remains bullish on FNGR stock’s potential to run.
@_TraderZero_ is bearish on FNGR’s chart.
Technical Analysis
FNGR stock is in a neutral trend, with the stock trading in a sideways channel between $3.82 and $4.71. Looking at the indicators, the stock is below the 200 and 50 MAs which is a bearish sign, but above the 21 MA which is a bullish sign. Meanwhile, the RSI is neutral at 52 and the MACD is neutral as well.
As for the fundamentals, China’s decision to cut trading taxes by 50% is a major catalyst for FNGR stock and other Chinese stocks. In this way, Chinese stocks could soar over the course of this week. Given the popularity of FNGR stock as a naked short squeeze play, it might run the most out of other Chinese stocks. For this reason, investors could wait for the stock to break through the 50 MA resistance with a pullback to enter long positions to capitalize on the stock’s potential run this week.
FNGR Stock Forecast
Chinese stocks are poised to spike this week following China’s decision to cut stock trading taxes by 50%. This catalyst is likely to incentivize Chinese traders to buy stocks in mass which should reflect on their ADRs. Given FNGR stock’s popularity due to its naked short squeeze potential, it could very well have the best run out of Chinese stocks which makes it one to watch closely this week.
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