Is AIFU really undervalued at the end of the year?
While screening stocks with price volatility over the past few months, I came across $BGM, a company that experienced an intraday surge of over 100% on two consecutive days in November, nearly doubling its stock price from the lowest to the highest point.
Curious, I dug into the news surrounding BGM and discovered that the spike was primarily due to a recent acquisition. BGM issued nearly 70 million Class A common shares at $2 per share to acquire two subsidiaries of AIFU outright. On the surface, it seemed like BGM snagged a bargain, but a deeper look revealed a more intriguing story.
BGM’s current stock price: $8.47 per share, significantly higher than the $2 issuance price. This means AIFU's assets, through this transaction, have generated substantial unrealized gains on paper. Simply put, this deal injected significant potential profits into AIFU's books.
Why does this matter? Because these gains will likely be reflected in AIFU’s upcoming quarterly earnings report. During earnings season, such one-time profits often act as catalysts for stock price movement. Interestingly, the market doesn’t yet seem to have fully priced in the positive impact of this deal on AIFU. The stock hasn’t shown significant reaction, which could present a buying opportunity for investors.
Of course, there’s an important point to clarify: Has AIFU’s valuation already accounted for the full benefit of this transaction? Currently, AIFU’s stock performance appears underwhelming, even overlooked, and the technical chart shows a classic triangle pattern, suggesting an imminent directional breakout.
Based on the potential gains from this acquisition, AIFU’s current valuation may still be far below its reasonable level. Moreover, the AI + InsurTech sector itself carries considerable growth potential. Not only has AIFU’s balance sheet improved with this deal, but the company might also leverage the transaction's proceeds or resources to further enhance its core business. If the market begins to factor in these possibilities, could AIFU’s stock undergo a significant revaluation? It’s worth pondering.
And here's my basic thought about this:
The market often reacts with a delay, especially with small-cap stocks like AIFU. However, once the upcoming earnings report reflects the positive financial impact of this deal, the stock could see a recovery or even a breakout. For value-oriented investors, now might be the time to wait for a potential upside.
That said, this is just my personal observation. Always do your due diligence before making any investment decisions. Markets carry inherent risks, so proceed cautiously!