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To investors,
I wrote to this group in early April saying that if I had presented at the Sohn Conference this year, my stock pick would have been DeFi Technologies, Inc (NEO: DEFI) (GR: R9B) (OTC: DEFTF).
The stock was trading around $0.51 per share at the time of my writing. Today it trades at $1.50 as of closing yesterday. Given the stock has tripled in price, some may be tricked into believing the stock is no longer undervalued.
I disagree.
DeFi Technologies announced their Q2 earnings yesterday and it was a blowout quarter. They reported the following for the 90 day period:
$98 million in revenue (up from less than $6M in Q2 2023)
$66.5 million in net income
$68.7 million in cash and stablecoins on the balance sheet
$21.2 million in crypto assets on the balance sheet
$29.5 million in debt paid down
43% AUM growth from start of the year till the end of Q2
It is hard to describe how incredible of a quarter this is for a company that did only ~ $10 million in revenue for all of 2023.
Here is why I think the company is still undervalued though. The current market cap is $439 million. If you take out cash, stablecoins, and crypto assets on the balance sheet, then the business enterprise value is $349 million.
DeFi’s leadership is projecting its annualized revenues for fiscal 2024 to reach approximately $131 million. This means the company is trading at a mere 2.6x 2024 revenue, which is an absurd valuation for a business that has shown an attractive growth rate.
Further, the company previous reported an additional $14 million in trading revenue for Q3 (this is not included in the Q2 earnings report), so total revenue for the year is already at $122 million based on what they have announced. This makes me think the company will probably exceed the $131 million revenue projection for 2024, but we will see what happens there.
As I have written to this group previously, and as I have shared on national television multiple times, I believe altcoin ETF issuers are an attractive asset as Wall Street embraces cryptocurrencies. I am an investor, both personally and professionally, in a number of these companies (Bitwise, 21 Shares, DeFi Technologies), but DeFi Technologies is the only publicly traded one that I have exposure to. We also sold one of our companies, Reflexivity Research, to DeFi Technologies to bolster their research capabilities at the start of 2024.
It is surprising to me that a company like DeFi can still appear so undervalued. The fact they trade in Canada definitely isn’t helping them, but at some point the market has to realize the asset is undervalued and begin to change that position.
And maybe the most fun part for me would be to have selected the best performing stock out of the Sohn Conference picks, but we won’t know that answer until next year when the 2025 conference begins :)
As always, do your own research. None of this is financial advice. I will continue watching the stock and company to see where it goes from here.
Hope you all have a great day. I’ll talk to everyone tomorrow.
-Anthony Pompliano
Founder & CEO, Professional Capital Management
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