SOS Limited (NYSE: SOS) is an emerging blockchain-based and big data-driven marketing solution provider with a nationwide membership base of ~20 million in China.

• Higher cash conversion period: The group reported a higher cash conversion period of 60.5 days in H1FY21, as compared to the industry median of 27 days. This indicates that the company takes a higher time to convert its investments to cash flows. Continuation of the above trend would dampen the company’s overall performance.

• Degrading margins: In H1FY21, the company posted a negative EBITDA margin and negative pretax margin of 7.9% and 10.8%, respectively, as compared to the industry median of 11% and 6.4%, respectively. Moreover, the company reported a negative net margin of 11.1% in H1FY21, as compared to the industry median of 4.9%. This indicates weak cost management and remains a key concern for the company.

• Recent update from NYSE: The stock of SOS comes under the American depositary shares (ADS), and recently, the company has failed to fulfil the compliance standards under NYSE, as the trading price of the stock is less than USD 1.00 over a consecutive 30 trading-day period. Moreover, being unable to fulfil the NYSE norms might lead to the delisting of the stock.
  

Risks associated with investment

Continuation of net losses might lead to liquidity risks and higher accumulated deficit for the firm, which remains a key concern. 

Stock Recommendation:

The stock of SOS is trading in a downtrend since the last one year and closed below its crucial moving averages of 50-days and 100-days, respectively. This indicates higher selling pressure and remains a major concern for the stock price. Moreover, the stock is available at a higher valuation of Price to earnings multiples of 13.4x on a TTM basis, as compared to the industry (Financials) median of 7.3x. Hence, considering the aforesaid facts, we give a ‘Watch’ stance on the stock of SOS at the current market price of USD 0.58 at 10.48 AM New York time on March 15, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on March 15, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.