Shares of SOS Limited (NYSE:SOS) were down 20% in May, according to data provided by S&P Global Market Intelligence. The company reported impressive revenue growth early in the month. But these financial results were overshadowed but the plunging price of Bitcoin (CRYPTO:BTC), pulling SOS stock down as well.
The price of Bitcoin cratered in May after Elon Musk questioned how environmentally friendly the process of mining was on social media. In a matter of days, the price of Bitcoin fell from around $55,000 to around $35,000. For its part, SOS has big plans in the cryptocurrency space, and the stock has skyrocketed over the past year as the price of various cryptocurrencies has soared. But in May, SOS stock fell as Bitcoin fell.
Somewhat ironically, SOS doesn’t currently generate much revenue from Bitcoin. In 2020, the company’s revenue was up over 300% year over year, but this was mostly for its insurance marketing business. In fact, 84% of revenue came from a single customer in its insurance marketing segment. That said, both Bitcoin and Ether (CRYPTO:ETH) (which is native to the Ethereum blockchain) figure heavily into the company’s plans. For example, SOS announced on May 18 that over 6,000 mining machines had become operational during the previous month. Some of these are dedicated to Bitcoin, while other are dedicated to Ethereum.
In summary, SOS’ insurance marketing business is growing just fine. One would have expected this small-cap stock to be up in May with financial results like that. But with the company’s recent focus on Bitcoin and Ethereum, the stock fell as the prices of these cryptocurrencies plummeted.
It seems SOS stock is getting some renewed interest from the market — the stock is up 15% for June as of this writing even though Bitcoin and Ether are slightly down. This might be because SOS management claims that it uses over 90% renewable energy for mining, distinguishing it from many other players in the space. Considering sustainability is suddenly top-of-mind for cryptocurrency investors, this is attracting attention to SOS stock.
This might be a short-term boost for SOS stock. But long term, the price of cryptocurrencies will need to keep rising in order for this stock to be a winning investment. And that’s something outside of SOS’ control.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.