For all you gamers looking to jump into the fray wondering if FingerMotion (NASDAQ: FNGR) is the real deal with more upside, we have some must-read analysis to prepare you for the ensuing battle ahead. The shorts will eventually attack, and you need to be ready. FNGR has all the makings of a Meme stock (cult-like following), which means the average investor doesn't know what they do. They are buying it because it's going up, the social media channels are growing exponentially, and they know there's a short squeeze happening. The stock is following almost a cookie-cutter approach to snuffing the shorts, but investors need to realize it's a process, not a one-day affair over the next day. FNGR is building a community of investors rallying behind the idea that they will squash the shorts that viciously prey on companies that need financing to grow.FNGR is currently in the discovery phase, which means people are putting it on their scanners, signing up on StockTwits, and getting YouTube and Twitter Alerts. They are all asking the question: did I miss it? Is it too late? Or they are certain it's a pump and dump that will be all gone tomorrow. The social media stats on FNGR tell the tale of where they are in the process. Some of the popular MEME tickers have huge followings on StockTwits.AMC has 400K followersGME has 250K followersSPCE has 140K followersBBBY has 54K followersKOSS has 19K followersFNGR has only 2,000 followers but is up from 75 followers just one week ago. GTII is just a little more advanced, with 4,000 followers. FNGR seems to be following the social media pattern in lockstep with GTII. Still, things started to diverge a little as FNGR showed an explosion of volume that translated into large gains in the following and better stock price performance. The number of followers is a good indicator of the early phase that it is in. While the price has gone up a lot, investors may be missing that shorts beat the stock down on anemic volume to a 90% discount of its fair value based on the latest Argus Research report. In that vein, Monday was transitioning to the middle phase, where investors should see large price appreciation daily.The next phase starts once the stock breaks into new highs called “Blue Sky.” This is the parabolic phase. With FNGR, this means breaking $17.00, which was its all-time high on 2/5/21. The price is currently low enough for investors to focus on the company’s prospects instead of just a snapshot of the here and now. The APE army is overwhelming the shorts and forcing them to put more and more money into play. Readers need to understand that FNGR is in the beginning stages of the short squeeze cycle, which means it is early to exit, considering the stock has not reached the most profitable part of the Meme cycle.The short squeeze started last week as the stock broke above $1.00 and increased in volume as the APEs piled in. Over 40 million shares were traded on Monday, October 3rd, compared to ~40 thousand the prior Monday, according to Finra. This represents a 1000x increase in volume in just one week and about 10x the entire float. The key to the velocity of this move is due to a complete and utter miscalculation by the shorts. They simply didn’t do their homework and after witnessing the wrong float on multiple brokerage platforms, it’s easy to see why the shorts were emboldened to take on such large short positions. The shorts think there are 23.6 million in the float when the reality is 4.2 million. This is a low float play! In contrast, in the current short squeeze with GTII, the volume represents only 10% of the float.If you are good at math, then the odds are you are still holding the FNGR shares that you bought at $1.00 because when looking at the momentum, there are no signs of the short squeeze slowing down. FNGR wants to break into new high territory over $17. This is also the most logical resistance point. All Meme stocks have taken out their all-time highs. Arguably, it’s not a Meme stock unless it can do that. This is the next big level for FNGR, where shorts may attempt to fall back and regroup.[embed]https://www.youtube.com/watch?v=TMue6EsyjJA[/embed]
DD Amanda Drag Indicator Suggests No Capitulation or Covering
The DD Amanda videos showed some backtesting of GTII and applied it to FNGR. The drag ratio is simply explained as the dollar volume of buying (drag) required to move the stock a price increment. The screener was also capable of predicting a topping formation in Meme stocks. When the drag indicator is maxed out, the short squeeze is in full, and the trend should continue. The model also showed that the RSI indicator was unreliable. The poor performance of the RSI stumped many YouTubers following FNGR.The volume of traded shares increased by 1000x in the past week, and there was a 76,000x increase in dollar value volume. According to DD Amanda, it took a whopping $380 million to limit the stock to a 93% gain. On Tuesday, the shorts might need over $1.0 billion+ to stay in the game, limiting the upward price movement. So their only choice now is to let it go higher and establish a short at a more advantageous price where the capital requirements are not so extreme. This means short covering on a massive scale if they are smart. The question then becomes: how much of the 34 million shares shorted over the past two days will fuel the upsurge? Too much volume too quickly leads to price volatility and trading halts. These trading halts create more investor awareness which feeds the upward price cycle.
Short Manipulation Evident = Desperation
The short’s margin calls would be based on the closing price, so with 11 minutes to the close on Monday, the shorts ran out of powder and stopped selling. This lets the stock spike to $6.50 and was halted for volatility. It was like an intentional football spike to stop the clock and get a close of $6.50, right at Argus Research’s price target.
Short and Distort Playbook Empty Except for These Last-Ditch Tactics
Shorts are desperate for any of their spaghetti to stick to the wall; the issue they have run into with FNGR is that the company’s sound business model leaves little room for deception tactics. They are left to make up lies simply; here was the first short attempt to trick investors.Claiming recent insider piece was a hit piece against AMC shareholders trying to draw a wedge in the APE army, which will never happen.
- Massive Dilution Coming - Convertible Debt
The favorite short attack will say massive dilution coming, and they will release the S1 showing 6 million shares coming to bear when they have simply registered warrants from the Lin Offering that have not and will not make their way into the float for some time. The company had already dealt with this attack and was primarily responsible for the stock slide under $2.00.
- Negative Cash Flow
The operating company is turning a profit and has been for some time. Most of the expenses are at the corporate level and related to running a NASDAQ company. They will bring up the cash on hand as being very light. Little do they know how to read financials. The balance sheet shows that 9 million are held as cash equivalents, which doesn't include the $4.0 million raised.Clearly, there is some nefarious entity behind the curtain aiming to deceive FNGR investors into panic-selling their shares. What this does teach investors, however, is that this is the best the short-sellers have in terms of short-attacks and that any bit of negative information must be approached with heavy skepticism. The next line of attack may be to discredit the company’s fundamentals which are stronger than ever.
Strong Fundamentals - Unicorn Justification
Chinese E-commerce companies like FNGR used to have valuations based on the number of users because they focused on the user base instead of profitability. FNGR has access to more than 1.0 billion users, making them the largest user base compared to the top e-commerce giants. That has changed to an earnings model. Alibaba (NASDAQ: BABA) has a P/E of 12.62 ($213 billion), JD.com (NYSE: JD) has a P/E of 48.18 ($76 billion), and Pinduoduo Inc. (NYSE: PDD) has a P/E of 29.31 ($79 billion). A reasonable Price to Earning Ratio is 40, given their growth rate of 38%. Unicorn valuation is $23.25/sh, and with a 40 P/E, they need to generate $25 million in earnings. Although there are no projections, the device protection business is supposed to monetize 1 million users monthly per Chinese province. There are 30 Chinese provinces. If they made $1.00 in earnings per providence, the conservative number is $30 mil in earnings which would put them over the Unicorn valuation.
Investment Summary
FingerMotion is a mobile phone data specialist that monetizes the user base of China Mobile and China Unicom, the top 2 carriers in China. They can sell Top-up minutes (low margins), SMS messages, or sell device protection insurance. They have plans for Life Insurance, Health Insurance, and car insurance. The device protection market is leading the value repricing of the stock along with a massive short squeeze. Launching that business is imminent and should lead to large revenue inflows and a large increase in profitability. Many are looking at FNGR as a Meme stock just starting its run, but the 4.2 million shares in the float are owned by long-term shareholders that understand the company's fundamentals and won't be easily enticed to let go of their shares. New investors must understand this social dynamic.While the social media craze builds for FNGR, it will be a rocky road as the shorts fight back with their short and distorted message and huge stock walls. The shorts' Achilles heel is the number of shares they have shorted over the past two days, equating to 34 million. They grossly miscalculated their ability to control the price and caused panic. When it comes time to buy back the shares due to failure to deliver (exposing the naked short) or margin calls, the brokers will put in large market buys to close out the short positions. Investors will see these volatility spike and possibly several trading halts. This upward trajectory should take the stock to new heights. All Meme stocks eventually broke their new highs, and FNGR looks like it will do it sooner versus later. There is a tremendous volatility risk in the name, and investors should trade according to their risk profile.
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Disclosure: Insider Financial and its owners have NOT been compensated for this article. This article was written by a guest contributor and solely reflects his opinions.Image by Leslin_Liu from Pixabay
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