After the remarkable advances of recent weeks, the share price of RC365 has continued to fluctuate. Can it rise higher this time?
The share price of RC365 stock (LSE: RCGH) is still on a roller coaster. The IT stock is declining once more after surging from 25p in mid-June to a closing high of 165p in just over a month. The final price per share was 119p.
When a stock’s price rises quickly, there may be a lot of selling. Those that invested early can take advantage of the possibility to make enormous riches. Unfortunately, individuals that invested early risk suffering significant financial losses.
So, has RC365 stock price had its fun? Or will the business quickly reach new record highs?
An intriguing tech stock
To quickly review, Regal Crown Technology Limited’s holding company is called RC365. Investors are drawn to it for two main reasons: a concentration on rapidly expanding emerging markets, and a chance to increase earnings quickly as the world gets more digitalized.
While RC365’s operations are mostly in China and Hong Kong, the business is also aiming to grow in Europe. Its primary purpose is to provide payment gateway services that enable Internet businesses to conduct business.
This industry has enormous development potential as e-commerce continues to grow, particularly in Asia. But what has recently propelled the share price is investor optimism over potential opportunities in artificial intelligence (AI).
The upcoming major AI stock?
In order to work together on AI technologies, Hatcher Group and RC365 signed a non-binding agreement in June. The former penny stock’s promise to fully utilize the AI initiative by allowing the implementation of the automated workflow in its proprietary applications and the integration of new features, such as blockchain technology and virtual banking facilities, seemed to blow investors away.
The market’s imagination was aroused by more than just that compelling goal statement, though. Excitement was also stoked by a bullish article or advertising that compared investing in tiny caps to decades-old investments in Apple, Google, and Microsoft.
According to the paper, RC365 stock might generate enormous gains similar to those of Nvidia, a different US computer corporation whose stock price increased 227% in 2023 as a result of the AI craze.
Would Warren Buffett invest in RC365 stock?
One of history’s most successful investors is Warren Buffett. So, does RC365 stock fit the description of the best stocks provided by the Oracle of Omaha?
The total wealth accumulated by Warren Buffett exceeds $100 billion. He is a master stock picker and is likely the most successful investor of all time.
What about RC365 (LSE: RCGH), which has grown by 500% in the last three months and by 720% over the past 12 months?
But does this stock fit the criteria for Buffett’s investments? Let’s look at it.
Buffett is renowned for his value investing strategy, in which he looks for businesses that, in his opinion, are fundamentally sound but are currently undervalued by investors.
He searches for stocks that are undervalued in relation to their intrinsic or book value. If so, there is a chance to buy equities at a discount and maybe profit from future price increases when the market begins to acknowledge their value.
So, is RC365 undervalued? The price-to-sales ratio on the market at the moment is about 100 times. That makes it extremely pricey. A P/S ratio of around 10 is really seen as costly. We cannot evaluate the company’s price-to-earnings ratio because it is not profitable.
Discounted cash flow calculations are also performed on any stocks that value investors like Buffett are investigating. But estimating future cash flows is extremely difficult given the scant financial facts at our disposal.
Investors in RC365 may contend that new business partnerships and an agreement for “AI development” with the Hong Kong-listed Hatcher Group have increased the company’s value. There is, however, scant proof that these contracts account for its skyrocketing share price.
In all honesty, Buffett definitely looks for a bit more pedigree, although he often invests in multibillion-dollar enterprises.
You must agree that that is a bold claim. But we’re not going to pour cold water on it. After all, when it was trading in the range of penny stocks a few decades ago, few would have predicted the rise of Amazon.
However, we do not intend to purchase RC365 stock for our portfolio today. Following that incredibly positive piece, there is still a lot of froth surrounding the stock. And for every IT stock that soars to success, many more fail miserably, leaving investors with significant financial losses.
We believe there are much more effective approaches to try and profit from the AI revolution. For instance, Microsoft, Nvidia, and Meta have made significant early strides in the industry. They also possess the resources and technological know-how necessary to prevail in what ought to be a fiercely competitive market.
RC365 still has a long way to go before it can compete with those tech titans. We don’t currently see a compelling enough reason to purchase the stock, especially given how unstable its share price is. We believe that right now, investors would be better suited to purchasing alternative growth equities.