Vocal platform owner Creatd, Inc. develops digital communities and markets branded digital content. The company provides Vocal, a content distribution platform that delivers a digital publishing platform organized into niche-communities capable of hosting rich media content. Its Vocal platform provides advertisers access to target markets that most closely match their interests. (CRTD) announced on June 30 that its Vocal+ subscribers had surpassed 30,000. CRTD is based in Fort Lee, N.J.

The company also completed the acquisition of a controlling stake of WHE Agency on July 20. While these developments, in part, helped the stock surge 9.5% over the past month, the stock hit its $7.80 intraday high on July 13, driven by a short-squeeze caused by Redditors’ interest in it. However, the stock has declined 57.2% since hitting its recent high and 30% over the past six months to close yesterday’s trading session at $3.34. 

CRTD is now phasing out duplicate outsourced consulting support and completing its permanent internal infrastructure. The company has not been able to generate any profit in the past 12 months. Furthermore, its average monthly cash burn during the first quarter (ended March 31, 2021) was roughly $1.80 million, representing an increase of approximately $1.30 million over its year-ago average monthly cash burn. So, CRTD’s near-term prospects look bleak.

Here are the factors that we think could influence CRTD’s performance in the coming months:

Weak Financials

For the first quarter, ended March 31, 2021, CRTD’s net revenue increased 153.8% year-over-year to $743,913, driven primarily  by a steady growth of Vocal+ paid subscribers. However, the company’s total operating expenses increased 215.7% year-over-year to $6.69 million. Its loss from operations for the quarter surged 225.6% from the same period last year to $5.95 million. CRTD’s net loss came in at $6.64 million, up 122.5% year-over-year. And its  loss per share came in at $0.68 compared to $0.96 in the prior year period. Also, its total assets declined 40.3% sequentially to $6.44 million.

Selling Shares to Fund Growth Activities

On June 21, 2021, CRTD closed a public offering of its common stock totaling approximately $2.6 million. It also completed a private placement of convertible notes and warrants on May 14 for $4 million in gross proceeds. CRTD is expected to use the proceeds for general corporate purposes and fund further marketing and development spending. Also, it generated roughly $7.77 million in January 2021 from the sale of its Series E Convertible Preferred Stock and accompanying warrants.

Stretched Valuation

In terms of trailing-12-month EV/Sales, CRTD’s 27.61x is 811.2% higher than the 3.03x industry average. Likewise, the stock’s 15.54x trailing-12-month P/S is 665.5% higher than the 2.03x industry average. Its 22.11x trailing-12-month Price-to-Book is also significantly higher than the 2.62x industry average.

POWR Ratings Reflect Bleak Prospects

CRTD has an overall F rating, which equates to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. CRTD has a D grade for Quality, which is in sync with its negative values for trailing-12-month ROTC and ROTA, versus the 3.70% and 1.86% respective industry averages.

The stock has an F grade for Value, in keeping with its significantly higher-than-industry valuation ratios. CRTD has an F grade for Stability also.

CRTD is ranked #74 of 75 stocks in the Internet industry. Click here to see the additional POWR Ratings for CRTD (Sentiment, Growth, and Momentum).

Better than CRTD: Click here to access 10 top-rated stocks in the same industry.

Bottom Line

While CRTD has been hitting new milestones with the help of Vocal+, it is still in the early stages of development. Furthermore, its sky-high valuation is not in sync with its fundamentals. So, we think it’s best to avoid the stock now.

CRTD shares were trading at $3.26 per share on Friday morning, down $0.08 (-2.40%). Year-to-date, CRTD has declined -21.63%, versus a 17.76% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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