I must admit, I’ve become obsessed with MicroCloud Hologram (NASDAQ:HOLO) stock lately and I’ve been writing down its movements. For example, the stock fell 75.27% on Tuesday, Feb. 20, to $16.41. It also declined 39.96% on Friday, Feb. 23, to $6.61. Frankly, this isn’t the type of stock that any sensible investor needs to get involved with.
Why is MicroCloud Hologram so fascinating to some stock traders? I have a couple of theories about that. What’s most important, though, is that it’s just too risky for investors to hold MicroCloud Hologram shares for more than a day or two, at most.
What’s the Appeal of HOLO Stock?
Meme-stock traders target stocks representing small to midsize companies with relatively small market capitalizations. MicroCloud Hologram fits this description, as the company’s market cap was only $31.27 million as of Feb. 23.
Just to provide a quick recap, MicroCloud Hologram is based in China and develops holographic technology. The company jumped headfirst onto the artificial intelligence bandwagon when it developed a “holographic virtual digital human based on” OpenAI’s ChatGPT “generative pre-training model.”
So, given the company’s small size and its ChatGPT association, meme-stock traders apparently couldn’t resist HOLO stock. Sometimes, the stock moves because of no news whatsoever other than pure speculative fervor.
Other times, the stock might move with the slightest provocation. For example, the MicroCloud Hologram share price once soared 56% because the company announced that it’s joining an industry association.
To quote InvestorPlace contributor Chris MacDonald, “[T]hat shouldn’t have been enough to move the needle for this Chinese company.”
It’s About the Stock, Not the Company
In all likelihood, many traders are only interested in the fast price action of HOLO stock and couldn’t care less about MicroCloud Hologram as a company. They’re just hoping to get lucky and catch a share-price spike at the right time.
That’s fine if you’re a short-term trader, but serious investors shouldn’t be too enamored with MicroCloud Hologram. Here’s an unsettling fact: MicroCloud Hologram completed a 1-for-10 reverse stock split not long ago, most likely to keep the company’s shares trading above $1 order to comply with the Nasdaq exchange’s listing requirements.
That’s a red flag, and here’s another one: it’s not easy to find recent, reliable financial information about MicroCloud Hologram. Believe me, I’ve tried.
I did manage to dig up MicroCloud Hologram’s Form 10-Q for 2023’s first quarter. On a year-over-year basis, the company’s revenue declined sharply while MicroCloud Hologram’s total operating expenses increased slightly. Moreover, the company reported a $3.5 million net loss attributable to ordinary shareholders for that quarter.
HOLO Stock: Maybe Trade It, Definitely Don’t Invest in It
If you’re a meme-stock day trader looking for fast action, maybe you’ll want to trade a few MicroCloud Hologram shares. However, that’s a speculator’s game and serious-minded investors shouldn’t get involved.
Maybe at some point in time, there will be valid, fundamentals-based reasons to invest in MicroCloud Hologram. For now, though, there’s too much volatility and risk. Consequently, most people shouldn’t take any chances with HOLO stock right now.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.