Blackboxstocks Leaps 50% On Q4 Results – Still Losing Money Though

Trade Blackboxstocks Shares Your Capital Is At Risk
Tim Worstall
Updated: 1 Apr 2022

Key points:

  • Gross Margin is up 97% on the year, but there are still significant losses
  • Clearly, further growth is required to cover overheads
  • Will this happen, given the trading decline?
  • The Best Undervalued Stocks to Watch in 2022

Blackboxstocks (NASDAQ: BLBX) stock is up a combined 50% and more given yesterday’s reaction to Q4 results and this morning’s premarket activity. The results are good for what they are, but it’s obviously possible to wonder about what the future holds.

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Blackboxstocks runs what is really an attempt to recreate a part of the Bloomberg terminal for private investors. That’s not wholly accurate, but it’s a reasonable pencil sketch. Another way of describing it is a mixture of AI and pattern recognition, data scraping off the markets and then the ability to day trade options and so on off that information.

They limit themselves somewhat by not marketing to professional investors. The paperwork requirements for doing so are such that it doesn’t really work through such an online system.

That this does limit their market is shown by the customer base. With the system costing around $1,000 a year and revenues of $6 million-odd they’ve clearly got in the range of 6,000 customers.

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The results from this customer base are very much better than they were last year. As the company results show, revenue near doubled to that $6 million-ish. However, cost of revenues only rose 50% or so to $1.8 million. Thus gross margin more than doubled to $4.2 million. That’s good – it’s the next part that isn’t quite so lovely. Software development costs rose by over half a million, selling general and administrative more than doubled to $4.6 million. The net loss has therefore increased from $350k to $2.6 million.

Well, yes, increasing revenue is all very well, so is an increase in gross margin. But what actually matters, in the end, is the increase in net profits, which is going in the wrong direction. Further, given the structure of the finances here it appears that costs go up more than revenues and margins – the bigger they grow, the more they lose.

It’s not wholly obvious, therefore that growth is a solution.

There is one other point to make here. Which is that the company is aimed at the ay trading clientele. Nothing wrong with that, but as we’ve seen at other companies like RobinHood this is something that rather peaked during lockdown. All those stimulus checks, the absence of sports betting, everyone staying at home, even the stonks on r/wallstreetbets, they contributed to a burst of trading. As matters return to more normal times that tide is receding somewhat.

Yes, it’s true, the Blackboxstocks revenues continued to increase over the time period when RobinHood saw retreats. But it’s still true that it’s not obvious that the day trading revolution is going to continue in the manner that the business plan might assume. It’s worth recalling that Blackboxstocks dropped 50% and more after the set of results back in November – the business model and financial structure are likely to continue to lead to such volatility.

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