This will be a more informal article discussing my thoughts on the recent, rather drastic, drop in the AITX share price recently. I was thinking of posting some of these on Twitter/Discord, but they got a bit long so I’m making a blog post instead. Hope this is interesting to you!
As is pretty clear, over 12 months the stock is on a pretty steady decline down from its high in February, down about 90%. Furthermore, there was an increase in October around the release of the 10Q and AITX has dropped about 60% since that date.
Let’s get into the long-term decline and then the short-term decline.
This might be an unpopular opinion amongst the AITX bulls, but AITX huge long-term decline is primarily due to the fact that the entire OTC experienced a massive pump from about December 2020 to March 2021 and put AITX into firmly overvalued territory. For some companies, there was nefarious pumping and companies “egging it on” so to speak. I don’t think AITX ever did that, and I believe the management has always been truthful about news, sentiment, etc.
However, because AITX swims in this ocean of OTC companies, the share price rode the same wave of unsubstantiated positive sentiment and rocketed the AITX stock into an unbelievable price. I know a lot of people got rich off of the share price reaching 0.25 per share, but quite frankly the company was never worth that much money. For example, on January 12th, there were about 2.5bn outstanding shares. By February 10th, the share price hit 0.28 per share. Using that same share count, which is likely incorrect as there should have been more shares by February 10th, that’s a market cap of 720m. But the actual market cap may have been closer to 1bn.
I think the hard truth for a lot of people who bought at that price is that the company was very overvalued at that time due to the great OTC pump that happened. The long-term decline since then is, in my opinion, due to the market understanding the company better, with investors finally being able to analyze the company and identify a more correct price. So yes, it sucks that the share price has dropped 90% since then, but to be honest people should not have been buying way back then.
As an investor, you need to understand and learn from events like this. Be careful about buying into a black swan event like this and know the risks involved. The level of share price growth was pricing on obnoxious levels of growth within AITX that would never have been achieved. That doesn’t mean it won’t be achieved one day, but it wasn’t going to happen as quickly as the great OTC pump priced in.
At the time of writing this, the share price has reached lows of about 0.018 per share, about a 60% drop from just two months ago. Why has this been happening? I can attribute this to several reasons.
First, AITX is still going through that price discovery phase after the massive share price increase in February. Many other OTC companies are still going through this. I think it has settled down a bit more since then, but we’re still seeing a steady decline. Which leads me to…
Secondly, people need to understand that the OTC is extremely sensitive to general market conditions. These are generally more thinly traded securities and one or two people unloading a position could crash a stock. Over the last few months with inflation, COVID, etc., the share price felt a more drastic effect versus blue chip stocks. It’s all part of doing business in the OTC and we all have to deal with it. You can’t have the high upside without high downside.
Third, notice how I mentioned the most recent share price increase was around the 10Q being released. In the OTC, algo traders and day traders tend to buy up shares solely based on news, especially 10K’s and 10Q’s, regardless of what is actually being said. AITX’s 10Q for Q2 FY 2022 was frankly pretty par for the course and didn’t give us any new, mind-blowing, information. However, the share price went up about 70% from October 14th to October 19th and has been on a steady decline since then.
This ties into my point above on investors more accurately identifying a fair intrinsic price. After the 10Q was released and investors had more time to digest, hear more info on the company, and develop a better understanding of company forecasts. Once bigger investors have been able to identify their entry points more properly, I believe the share price has continued to decay and have a steady decline.
Fourth, the OTC is a fickle beast. OTC companies tend to get hyped up based on some news event and then just slowly decay until another news event happens. Over the long term, assuming it’s a successful company, you’ll see a very long term upward trend, but it could be years of a roller coaster. And depending on when you enter in, you could be looking at years of negative returns until a company stabilizes. For example, if you bought Amazon at the peak of the internet bubble, it would have taken nine years for your share price to go green and stay green indefinitely.
So, in general, I think there have been a combination of outside factors like inflation and COVID, the normal bumps in the road of the OTC overhyping the 10Q release, and the market still trying to find a proper price.
For the bulls, this share price decay is not fun. The share price was overvalued in my opinion many months ago and we are still feeling the after-effects of that via this long-term price decay. At some point though, everything reaches a fair price.
All you can do as a long-term holder is to keep modeling out AITX, understanding where you think sales and profitability will be in 3, 5, and 10 years. From there, you can discount back to a share price today. Pay close attention to sales announcements, use L4TH’s sale tracker, think very carefully about how many units AITX could reasonably sell over time, etc. Once you are comfortable there, determine a reasonable share price down the road based on some earnings multiple, etc. and discount back to today.
You may find then that maybe AITX is/was overvalued, and your entry point hasn’t come yet. However, many of the long-term holders may also think “These prices are an amazing buy opportunity for how confident I am in the company.” If that’s you, now is the time to invest what you’re comfortable with. Everything else is just noise in terms of the share price in the short term, the real share price you should be worried about is your long-term target (note my Amazon example above). Just focus on the company performance, etc. and the share price will follow in the long-term.
In closing, we all need to step back and remember that no matter how bullish you are on AITX, nothing is guaranteed. We are all hoping for immense upside that will make you rich, but you can’t have that level of upside without the same amount of downside. If you want guaranteed, go buy a treasury bond. If you want to take some risk, remember the opposite could happen. So, let’s all manage our expectations and remember that we are all taking a calculated risk here.
For further reading and AITX analysis, check out all of my articles HERE as well as in the sidebar.
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DISCLAIMER – I CURRENTLY HOLD A LONG POSITION IN $AITX. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES.
8 thoughts on “AITX Analysis – Notes on the Recent Share Price”
Any thoughts on the dilution caused by issuance of shares
I personally don’t believe the dilution is bad for shareholders in this case, but that’s a very subjective opinion. See my other articles on dilution, they go into it in way more detail.
Thanks again Sam
Why did every single penny stock have the same exact graph? I feel that the hedge funds that lost in GameStop shorted thousands of penny stocks for pay backs from losing billions from GameStop.
Thank you for your insight , great advice in this peticular stock. I too am a holder from 2020 .
Great info… Long term holder here.
Long and will add more at the low price now. Love your articles. Very well said.