Are you in the market for meme stocks and/or penny stocks? Perhaps MGO Global (NASDAQ:MGOL) caught your eye, as MGO Global is a tiny company that could grow much bigger. However, a moonshot seems improbable and MGO Global stock is too risky for sensible investors to buy and hold in 2024.
Surely, it’s not a coincidence that the MGO Global share price spiked in mid-May, during the recent meme-stock short-squeeze rally. That was exciting, no doubt, but prudent investors should focus on MGO Global’s viability as a business enterprise. As we’ll discover, the outlook for MGO Global is unclear at best and dismal at worst.
MGO Global Loses a Soccer Superstar
If you follow international soccer at all, you’re undoubtedly aware of Argentina’s Lionel Messi. He’s a world-famous soccer player, and for a while, MGO Global could generate revenue from sales of the Messi Brand line of apparel.
That revenue stream ended, however, when MGO Global sold its Trademark License Agreement to Centric Brand. MGO Global got a $2 million payout as part of the TLA-divestment deal, but surely it was a devastating blow to MGO Global to lose the Messi-endorsed clothing-sales rights.
WWD published an in-depth report on the full, messy story of MGO Global’s loss of the Messi Brand rights. Apparently, MGO Global just couldn’t afford to pay the combination of licensing fees, royalty payments and other liabilities.
So, how is MGO Global making money without Messi? Let’s dig a little deeper and see if MGO Global’s has any red or green “flags” (pun fully intended).
Flagging MGO Global’s Financial Issues
To put it bluntly, MGO Global now sells flags and flagpoles, primarily. The company primarily focuses on patriotic flags.
Thus, that’s the business model you’ll be betting your hard-earned money on if you buy and hold MGO Global stock. Is this a financially viable company, though?
I can’t easily predict the future, but I can certainly look at the recent past. In 2024’s first quarter, MGO Global incurred a net loss from continuing operations of $1,864,135. That’s 169% worse than the company’s net loss of $692,506 from the year-earlier quarter.
If this pattern of net losses continues, MGO Global could quickly burn through the $2 million it gained from the Messi Brand rights sale. Could MGO Global counter this problem through flag sales in 2024, though?
Yes, I know it’s an election year and MGO Global certainly emphasized the potential for a bump in flagpole and flag sales. The problem here is that MGO Global just recently surged due to the aforementioned meme-stock rally.
Now, MGO Global has to justify the higher share price, without Messi’s help, through very strong flag and flagpole sales. Are you really prepared to wager your investable capital on that?
Don’t Wave Your Flag for MGO Global Stock
It’s fun to bet on small businesses that you think will become big businesses. After the messy Messi breakup, however, MGO Global is little more than a purveyor of flags and flagpoles.
Hopefully, MGO Global can reverse the trend of widening earnings losses through flag sales in an election year.
Anything’s possible, but I’m just not willing to take the risk and wager on MGO Global’s financial turnaround. I definitely don’t recommend ignoring the red flags and buying MGO Global stock.
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.