Market Overview

Veritone's Huge Move Provides Valuable Trading Lessons

Veritone's Huge Move Provides Valuable Trading Lessons

Sometimes a stock has such explosive potential that all it needs is one spark to set off major fireworks. On Aug. 18, an article written by Barron’s tech trader Tiernan Ray was just the spark artificial intelligence IPO Veritone Inc (NASDAQ: VERI) needed.

Prior to the Barron’s article, Veritone recieved very little attention. The stock’s $162 million market cap and thin trading volume had it trading mostly under-the-radar since its May IPO. In fact, short sellers may have been the only ones paying attention. Shares had plummeted nearly 50 percent from their IPO price of $15 to under $8 per share.

The Barron's Bump

According to Ray's article, investors have a misconception that companies developing AI technology must have huge databases of information in order to fine-tune their software. However, Veritone CEO Chad Steelberg told Barron’s that Veritone’s strategy is all about acquiring collections of AI algorithms, or “engines.” While Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) has one engine, Steelberg said, Veritone already has 30 just for natural language processing alone.

“Although no one Veritone client necessarily has massive amounts of data on its own, Steelberg expects to make up for that by pooling insights across his company’s customer base,” Ray wrote.

Related Link: Trading Veritone's Barron's Pop

Incredibly, in less than one month since the article was published, Veritone stock has more than tripled and is now trading above $25 per share.

Market Factors

Without any major fundamental catalysts other than the Barron’s article, the huge move was likely the result of a number of unique market factors:

  • Most retail traders had no idea Veritone existed before the article.
  • Veritone had a large number of short sellers who have chosen or been forced to cover positions in the past month.
  • Veritone’s small market cap makes it prone to volatility.
  • There are very few pure-play AI stocks out there for investors to play such a high-growth long-term thesis.

Whether or not the huge move in Veritone’s stock is justified from a fundamental standpoint remains to be seen. However, the fact that the Barron’s article was published late on a Friday demonstrates just how much trading financial markets is a 24/7 job.

A Learning Opportunity

Veritone actually finished the day lower by 4.1 percent on the Friday the Barron’s article was published. After traders had time to catch up on the news over the weekend, the stock opened the following week with nearly a 50-percent gain and never looked back.

Shares of Veritone on Wednesday closed down 12.96 percent at $24.98.

Joel Elconin contributed to this story.


Image Credit: Screengrab from YouTube

Posted-In: Long Ideas Education Short Ideas Technicals Movers Tech Media Trading Ideas Best of Benzinga


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