GoldSpot Discoveries Corp. (TSXV: SPOT) is a technology company that uses artificial intelligence (“AI”) and traditional domain expertise alongside a portfolio of software tools to assist in discovering new mineral deposits for its clients.

Key Updates:

• Broken crucial support level: On a daily chart, the SPOT stock has closed below its crucial support level of CAD 0.77, which indicates that the stock could test its next lower support of CAD 0.36. Moreover, the stock has closed below its 20-days and 50-days simple moving averages, indicating a bearish technical pattern and further possibility of price erosion.

One-Year Technical Price Chart (as on February 04, 2022). Analysis by Kalkine Group

• Weak Performance metrics: During Q3FY21, the company reported a huge loss from its net investments (CAD 10.36 million v/s a gain of CAD 2.92 million in PCP), which has impacted the company’s overall performance.

• Significant rise in Input costs: In 9MFY21, the company reported significantly higher salaries and consulting fees expense (CAD 5.82 million v/s CAD 2.36 million 9MFY20 in PCP) and higher stock-based compensation expense (CAD 0.56 million v/s CAD 0.29 million in PCP) for the similar period. Moreover, other employee benefits also surged CAD 0.28 million in 9MFY21 from CAD 0.16 million in PCP. Total costs during the period 9MFY21 stood higher at CAD 7.65 million, as compared to CAD 4.07 million in 9MFY20 (PCP). Continuation of the above trend might impact the company’s profitability.

Stock Recommendation:

For 9MFY21, the company reported cash used in operating activities of CAD 0.88 million, as compared to the cash from operations of CAD 0.142 million. This might impact the company's overall liquidity and remains a major concern. The stock of SPOT is available at a significantly higher Price/ Earnings valuation of 16x on TTM basis, as compared to the industry (Metals & Mining) median of 3.7x, making it overvalued at these levels. Hence, considering the aforesaid facts, we give a ‘Sell’ rating on the stock of SPOT at the last traded price of CAD 0.69, down 2.82%, as of February 04, 2022.

One-Year Technical Price Chart (as on February 04, 2022). Analysis by Kalkine Group

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