Bending Spoons stock has staged a strong comeback in the past three days, moving from this month’s low of $31.5 to the current $41. This rebound happened as investors bought the dip and after the company secured funding for its Miro acquisition. This article looks at whether BSP is a good stock to buy.
Bending Spoons’ growth is accelerating
Bending Spoons is a newly listed technology company whose business approach is buying technology companies that have fallen out of favor among users and improving them.
Over the years, it has acquired companies like Evernote, AOL, Vimeo, WeTransfer, Meetup, and Eventbrite. Its other acquisitions are companies like Brightcove, Airtable, and Streamyard. Most recently, it announced that it would acquire Miro, a company in the artificial intelligence industry. It has spent nearly $6 billion making 15 acquisitions since its starting in 2023.
The company always works to improve the products it acquires. For example, it released over 70 product improvements across AOL, Eventbrite, and Vimeo in the second quarter of the year. It has identified over 1,000 companies that it believes are attractive acquisition targets.
Its recent results showed that its revenue jumped by 126% in the quarter to $704 million. This growth, however, was mostly driven by its new acquisitions that happened during the year.
Its operating income rose by 139% to $240 million, meaning that its operating margin jumped to 54%. The management believes that its growth will continue in the coming years as it works on the existing companies. Also, it believes that it can leverage the use of AI to reduce its costs.
The expectation is that its third-quarter revenue will be between $733 million and $745 million, representing a 113% annual growth rate. Its operating income is expected to be between $380 million and $400 million. For the year, it expects that its revenue will be between $2.78 billion and $2.82 billion.
Bending Spoons faces some major risks
The company faces two main challenges. First, it now needs to continue its acquisition trajectory to continue, a move that will require substantial cash. In a recent presentation, the management said that its gross debt jumped to over $5.9 billion, with the net figure rising to $5.4 billion. This debt growth will continue in the longer term.
Second, the company will likely start diluting its shareholders by using its equity to fund these acquisitions. In a statement, Lucca Ferrari, the co-founder and CEO said:
“As a public company, we now have access to a broader range of financing sources. We’ll select among those sources carefully, remaining focused on the objectives of maximizing long-term shareholder returns while keeping a prudent risk profile.”
Third, and most importantly, turning around some of these companies will not be easy. Indeed, history shows that most mergers and acquisitions don’t generate the returns that management predicts. As such, in the future, there is a likelihood that the company will be forced to have some big write-downs. Therefore, while the stock may continue recovering, there is a risk that these challenges will derail it.