The GigaCloud Technology (NASDAQ: GCT) stock price has moved into a deep bear market in the past three months. It has crashed by over 35%, making it one of the worst-performing technology companies.
Concerns about GigaCloud continues
GigaCloud Technology’s share price has crashed as investors weigh its rosy financial results against a recent short-seller report by Grizzly Research.
In its report, which I covered here, Grizzly noted that the company was vastly overstating its metrics. For example, the report noted that third-party website metrics showed that GigaCloud’s site was seeing weak traffic.
GigaCloud has rejected the claim and pointed to other third-party data that showed that its website traffic was just fine. As a business-to-business website, the company does not necessarily need millions of visitors per month.
Grizzly’s rebuttal did not include other allegations made by Grizzly. For example, Grizzly warned that the company was mostly trading among itself, a situation made possible by it registering companies in other countries.
The most recent financial results have pointed to strong financial results by GigaCloud Technology. Its revenue surged by over 25% in the last quarter to more than $251 million while its gross profit soared by 127% to $29.6 million. Most importantly, its net income jumped by 71% to over $27.2 million even as its net income margin fell by 160 basis points.
GigaCloud Technology has achieved this while having a small number of users in its platform. Active buyers in the last 12 months stood at 5,493 while active sellers stood at just 843. This is understandable since GCT focuses on high-volume customers.
Therefore, it is hard to take sides when considering the company’s strong financial results and the Grizzly report. As I wrote at the time, where there is smoke, there is fire, especially since GigaCloud is a Chinese company that is hard to track. As such, most experts recommend caution when investing in companies that lack enough clarity.
GigaCloud Technology stock price analysis
The daily chart shows that the GCT share price has crashed hard in the past few weeks. It has found a strong support at $25.26, where it failed to move below in March and May this year.
However, the stock has formed what looks like a double-top chart pattern. It has also dropped below the 50-day and 100-day Exponential Moving Averages (EMA) while the momentum indicator has pointed downwards.
Therefore, the path of the least resistance for the stock is downwards, with the initial target to watch being at $25.26.
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