BuzzFeed stock: The sad transition from a unicorn to a penny stock
BuzzFeed (NASDAQ: BZFD) has had a dramatic collapse from a disruptor in the media space to a company on the verge of collapse. Its stock has crashed from an all-time high of $14.78 in December 2021 to $0.30. Its valuation has plunged from over $1 billion into a penny stock valued at over $47 million.
Growth concerns remainCopy link to section
BuzzFeed is one of the leading pioneers in the digital media industry. The company became well-known for its clickbait headlines, trivia, and other viral content.
At its peak, the company counted leading companies like Comcast, Andreessen Horowitz, and Redwood Ventures as its investors. It also acquired other well-known brands like Complex Networks and Huffington Post.
Buzzfeed stock price has underperformed the market since going public in 2021. In this period, investors have been concerned about the company’s slow growth and cash burn. The company’s revenue jumped to over $436 million in 2022, up from $397 million in the previous year. At the same time, its loss jumped to over $200 million.
The most recent results showed that Buzzfeed’s business was not improving as the ad business continued facing headwinds. Its revenue dropped by 27% YoY as the ad business continued falling. In the earnings call, the management cited the growing competition and falling ad dollars.
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Buzzfeed made $77 million in revenue as ad revenue fell by 27% and content declined by 22%. The management also expects that its revenue will drop by between 25% and 29% to between $73 million and $78 million. Its adjusted EBITDA will be between $1 million and $4 million.
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Is Buzzfeed stock a good investment?Copy link to section
According to WeBull, Buzzfeed has a market cap of over $44.8 million. This valuation means that investors anticipate losses to remain for a while. It also means that there are worries about more dilution.
Looking at Buzzfeed’s balance sheet, we see that it ended Q2 with over $41 million in cash and short-term investments. As such, looking at its valuation and its cash, we can argue that the company is a bit undervalued.
However, looking at its liabilities, the company has over $156 million in long-term debt and over $37.5 million in accounts payable. Its total assets stood at $446 million while total liabilities were over $312 million. Therefore, the company is still facing significant risks.
Therefore, I suspect that the company is facing substantial risks, especially with its huge debt burden. It is also seeing weaker traffic and low revenue metrics.
Buzzfeed stock price forecastCopy link to section
The daily chart shows that the BZFD stock price has been in a strong bearish trend in the past few months. Most recently, the shares have crashed below the important support at $0.4857, the lowest level in May 2022, June 2023, and August 23rd. The stock remains below the 50-day and 25-day moving averages while the Relative Strength Index (RSI) has moved to the oversold level.
Therefore, I believe that investing in BuzzFeed is still risky now that interest rates are set to remain at an elevated level for a while. This view is in line with what I predicted a few months ago.