Waton Financial Limited shares have soared 400% since their Nasdaq debut.
WTF plans to use $17.5 million raised from the initial public offering (IPO), to improve its trading platform, and strengthen its asset management segment.
The company sold 4,38 million shares total, valuing the offering at $190 million.
Waton Financial’s stock is now valued at around $20, a significant increase from the IPO price which was only $4.0.
Is Waton Financial a meme stock?
Waton Financial, at its current levels, is a high-risk stock because retail investors are likely to have driven much of the rally in its debut. This makes it similar to “meme stocks”.
It’s therefore believable that WTF stocks could see a massive correction after the initial surge. This is what usually happens with meme stocks.
Waton Financial’s stock is currently selling for a price to sales multiple of 90, which is a lot more expensive than Charles Schwab or Robinhood, who are both priced at less that 15 times.
This highlights the disconnect between WTF’s financials, and its valuation. And it’s not as if WTF pays out a dividend in order to encourage investors to invest in it despite its gross overvaluation.
WTF’s profitability does not inspire.
Waton Financial’s stock is currently at a high price, and it is prudent to avoid buying it. It operates in a highly competitive financial technology landscape.
The sector has the potential to grow, but the company’s ability scale and compete internationally remains uncertain. This is especially true when it’s competing with renowned names such as Charles Schwab, Robinhood and Interactive Brokers.
WTF’s profitability is also not very inspiring. Waton’s revenue grew by 73% in 2024.
Waton Financial’s net profit was down 19% in the last year. This further proves that investing in Waton Financial comes with significant risks.
Waton is concerned about inflation and interest rates
Last week, the core personal consumption expenditures (PCE), which is the Fed’s preferred inflation gauge for the month, rose by 0.4% and 2.8% over the year.
Economists had predicted a 0.3% increase and a 2.7% rise, respectively.
A higher inflation rate could make it harder for the Federal Reserve in 2025 to lower its key interest rates. This could be another factor that hurts WTF shares.
The rising borrowing costs could reduce trading activity and affect its brokerage services.
A higher rate could also increase the cost of margin finance, which may deter some clients.
These macro factors indicate that, when combined, investing in Waton Financial, especially at a high valuation could be disastrous for investors by 2025.
This post Waton Financial soars 400% on Nasdaq debut – is WTF a sell, buy, or hold? This post may be updated as new information becomes available
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