MicroCloud (HOLO) stock surged after earnings: is it a buy?

MicroCloud Hologram (NASDAQ: HOLO) stock price went through a short squeeze this week after the company published its annual report. It soared by more than 21.6% on Wednesday’s regular session and continued the upside in the post-market session. This rally brought its market cap to over $15 million.

MicroCloud’s rally happened in a high-volume environment. Data by Yahoo Finance shows that the volume on Wednesday stood at 13.9 million shares, up from 3.75 million on Tuesday. 

MicroCloud’s results showed that its revenue dropped from RMB 487.9 million in 2022 to RMB $203 million or $28.8 million in 2023. It then narrowed its net loss from RMB 136.4 million to RMB 81.5 million. 

At the same time, the company’s balance sheet continued worsening as the company boosted its research and investment spending. Total cash and equivalents stood at $17.7 million from $20 million a year earlier. 

This explains why the company is planning to dilute its shareholders more. In a filing in February, the management said that they would raise $100 million from investors. This capital raising will be in the form of equity, debt securities, and warrants. 

MicroCloud has a history of diluting its stockholders. Its outstanding shares in July last year stood at over 5.08 million, a number that jumped to 5.94 million at the beginning of the year.

For starters, MicroCloud is a Chinese company that aims to become a major player in the hologram industry. In this, it aims to use technologies like big data, cloud computing, and artificial intelligence to build a digital virtual world. It believes that its target market is expected to continue growing after it is expected to get to over $43.2 billion in 2025.

MicroCloud Hologram will benefit from the industry by building its Light Detection and Ranging (LiDAR) solutions that are used in the automobile industry. This technology is used un advanced driver assistance systems (ADAS) by some companies in China.

Still, the outlook for the HOLO stock price is still weak, especially at a time when tensions between China and the US are rising. Also, other companies in the LIDAR industry like Luminar and Aeva Technologies have also tumbled. 

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