GigaCloud stock has been on a wild ride since the e-commerce tech company reported earnings two weeks ago.
GigaCloud stock jumped more than 20% on March 15 when GigaCloud reported results that beat Wall Street estimates.
But then came the crazy fluctuations.
After rocketing 23% that Friday, the shares plunged 21% the following Monday on March 18. That kicked off a roller coaster run that has continued this week. GigaCloud stock climbed 3% on Monday then dropped 7.6% to close at 25.60 on Tuesday.
GigaCloud Stock: Unaudited Results
So what happened?
It seems part of the problem was the earnings report itself.
The results were stellar: GigaCloud soundly beat earnings and revenue projections. The company also posted an outlook that easily beat expectations.
But the company's press release, which also covered its fiscal year ended Dec. 31, said the results were "unaudited." That in itself is normal, even for large U.S. companies.
GigaCloud filed an 8-K on the earnings release with the U.S. Securities and Exchange Commission. Once again, standard operating procedure. But the company also submitted a Notification of Late Filing with the SEC filing saying GigaCloud's 10-K report for its fiscal year ended Dec. 31, will be delayed. The company said it will file the report by April 1.
Questions On Delayed Filing
Marc Fagel, former SEC regional director for San Francisco, said it is "hard for me to come to any conclusions" based on limited information. But "it does strike me as odd to report unaudited earnings with the 10-K delay following so closely," he told Investor's Business Daily.
Asked about criticisms of the GigaCloud filings, a company representative reaffirmed the company's official explanation.
GigaCloud stock, which went public on the Nasdaq in 2022, had been operating in the U.S. as a foreign private issuer, which means the company enjoys some access to capital markets so long as they comply with reporting requirements. The company's headquarters is in El Monte, Calif. GigaCloud described itself in its IPO filing as a " holding company incorporated in the Cayman Islands and not a direct Chinese or Hong Kong operating company." The company has major offices in Hong Kong and the U.K.
The 10-K that GigaCloud is required to report is its "first annual report filing" under "obligations as a company that is not a foreign private issuer," the company's March 15 SEC filing said. GigaCloud said the delay was caused by the need for "additional efforts for compilation and review to ensure adequate disclosure of the information required."
This includes information on two recent acquisitions which closed toward the end of 2023. The transactions "required additional time and effort for our accounting teams to finalize," the GigaCloud representative told IBD.
"In the meantime, we are working diligently to file our 10-K as soon as possible," the representative added.
A Risky Process
Hermine Wong, another former SEC attorney and UC Berkeley College of Law lecturer, said "it's possible that they are getting their financials out now, and then the auditing might change them."
"But that seems like a super-dangerous game to play," she told IBD. "Issuing the press release with the earnings and then to significantly revise them in the 10-K which covers the same reporting period" could raise questions.
It certainly could also spook investors, which apparently happened — even though GigaCloud for the most part appears to be a solid, well-run company.
GigaCloud Stock Gets High Ratings
GigaCloud stock has an IBD Relative Strength Rating of 99, which means it outperforms 99% of the companies on the IBD database over the past 12 months.
In recent days, GigaCloud pierced its 50-day moving average as the latest sell-off has shown more teeth.
After a big stock run, a big drop through the 50-day line serves as an excellent signal to take profits. Meanwhile, the weekly chart also shows the small cap is poised to finish below the 10-week moving average for the second straight week. The recent weakness highlights a change in character.
Sophie Huang of CMB International, the only GigaCloud stock analyst listed on FactSet, was also upbeat about GCT. After the earnings report, she maintained a buy rating on the company with a 43 price target. "We see high visibility for its strong performance in (the) next few quarters, backed by continuous share gain," she wrote.
CEO Larry Wu touted the GigaCloud's momentum on the March 18 earnings call, saying the company's results "marked a significant inflection point for GigaCloud, one which has changed the trajectory of the business and that we believe will change the way people think about the industry."
You can follow Benjamin Pimentel on LinkedIn and Twitter/X @benpimentel
