MICT Stock Has The Potential To Grow Wings

MICT Inc (NASDAQ: MICT) has had a strong start to the month of June, and for good reason. The company has been executing, generating revenue from insurance with plans to expand that revenue in a big way with the launch of the company’s trading platform late this month or early next month. 

Nonetheless, since reaching highs on June 7, the stock has tapered off a bit and some are asking, “Should I be concerned?”

The answer is a resounding no, and here’s why:

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Profit Taking Is Normal

First and foremost, stock market participants do what they do in order to make money, but they’re also emotional beings. So, we tend to see wide swings in value as greed and fear set in. One common move is a swing down after a stock reaches a high. This happens because investors decide to take some of the profits they’ve earned from the stock, selling some of the shares in their portfolio. 

This is a normal reaction to upward movement, especially when that upward movement brings a stock from $1.43 per share to $2.49 per share in a matter of weeks. 

Nonetheless, the profit takers are likely missing a huge opportunity because there’s still a clear undervaluation. Not to mention the fact that several catalysts are on the horizon. 

Insurance Revenues

First and foremost, while investors seem to be focused on the coming launch of the trading platform, which is exciting news, they’re putting a big part of the equation on the backburner, the company’s insurance platform. 

Early this year, MICT announced that it received licensing to take its relatively small, regional insurance offering to the national stage in China. Many shrugged off the announcement, which proved to be a mistake when the company announced its first quarter financial results. 

During the quarter, the company produced $8.94 million in revenue, the vast majority of which came from the insurance product. That doesn’t sound like a big deal? Think about it this way: 

  • What other arm of a publicly traded company do you know that generated nearly $9 million in revenue in its first quarter of operations?
  • Going further, MICT didn’t announce the license until well into the quarter, and considering the time it takes to implement efforts, I would venture to say that the nearly $9 million was produced in the last month of the quarter. That makes the figure even more impressive. 
  • More impressive still, is the figure when you look at the future. The first real month or so of operation led to millions in revenue, and if the company is like most other companies, there were hiccups along the way. After all, we’re talking about the very beginning of the insurance program. Even if the insurance platform’s growth was flat, it would be on pace to produce much more growth ahead!

That’s a huge opportunity. That’s especially the case when you consider the fact that the company trades with a $250 million valuation. That’s a serious undervaluation.

The Valuation Doesn’t Make Sense

Just looking at things from the insurance side tells you that MICT is heavily undervalued. However, there’s more to the valuation picture. After all, the trading platform is coming. 

That’s right. Recently, MICT said that it intends on launching its trading platform in Hong Kong by either late June or early July. That’s a huge catalyst on the horizon!

Competing companies with active trading platforms are trading with valuations in the billions. However, there are few that actually have Hong Kong licensing, don’t work with third parties, and are in complete control over their revenue, platform, and data generated through the platform. MICT is one of those very few. 

Now, the question is quickly shifting from, “Is MICT stock undervalued?” to, “When will MICT stock climb to a fair market valuation?”

That’s a hard question to answer, but what I can tell you is that with the insurance platform, and tremendous revenues it generated in its first month or so of operations, there’s a clear undervaluation here. Add in the coming trading platform and what we see is absolutely absurd. 

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The Bottom Line

So, getting back to the question posed in the beginning of this article, “Should investors be concerned about recent declines?” No! These declines represent an opportunity to get access to tremendous potential for revenue and profitability growth ahead, for what I believe to be pennies on the dollar. No, there’s no concern necessary. This MICT story only warrants excitement. 

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CNA Finance is not an investment advisor or broker/dealer. This article is for informational and entertainment purposes and does not constitute a recommendation to buy or sell any security. CNA Finance has a monetary relationship with MICT. Trading in penny stocks can result in significant losses.