BRDS finally ready to fly

I don't normally advocate for penny stocks, more often than not they're a scam. But, that being said, I like growth stocks almost as much as I enjoy my weekly trip to the ice-cream stand. Now, I normally take an Uber to my weekly pilgrimage to two scoops of indulgence, but on my most recent trip I took a Bird scooter. I did this for two reasons: first, the weather was impeccable. Second, and more importantly, Uber prices for around-town transport is now astronomically high. Maybe it's the gas, maybe its the ride-share industry's push to get to profitability. Who knows.

Regardless, it clicked for me once BRDS popped up on my screener this past week with a big 'ol green buy sign. I think it's important to get a sense of the macro before making any trade so before I get into why I think BRDS is in a prime spot to be bought now I'll try to give an impartial view of the headwinds that have caused BRDS to take a colossal shit since their IPO that is greater than the collective dung released by all the pigeons in NYC.

Take these pros and cons with a grain of salt, clearly I've signaled I think this stock is worth going long so I'm clearly partial. .

Cons

• BRDS is bleeding cash. Like hemorrhaging. It's gushing so bad that they're going to need to tap into their 100M debt line or raise new equity soon and probably often to offset this cash-burning bonfire. Their CFO says that a large portion of the cash outlays over the last few quarters have been to invest in increasing the number of vehicles (scooters, bikes, etc.) that they operate and these expenses will decrease in the short-term, but regardless, its not great.
  
• The currently low stock price means that new equity issuance to offset the cash outflow will have substantial dilution. The same thing is true for new equity issuance for compensation. Also, since the price has tanked so much, it's very feasible that management will issue extra stock to employees to make up for how much it's tanked.
  
• Covid - this is an obligatory callout since the EU is a little more conscious about managing Covid and travel and new strains always have an opportunity for large, negative impact to this space
  
• Rolling out to new cities is expensive, a minimum number of crew on the ground, a jump start with marketing and advertising to attract customers and large capital outlays for new vehicles.
  

Pros

• Major cities are slowly, but surely, opening up pilot programs to allow scooters and other micro mobility companies to operate. Two major ones expanding this year are NYC and Chicago.
  
• In the most recent earnings call they posted positive EBIT in the most recent quarter and management expects that to continue for this year and to achieve positive Adjusted EBITDA for all of next year. More holistically speaking, they are pivoting from absolute growth at all costs to moderate growth so-we-dont-lose-so-much-cash.
  
• Covid - how can this also be a pro? Are you an idiot BnBEP? Yes, I probably am, but as the US and EU continue to be more nonchalant about Covid the more people will get out and about for their ice cream.
  
• Pricing elasticity for urban transportation is shifting in BRDS favor - as mentioned above, Uber & Lyft compete with BRDS in the short-distance mobility space (2-3 miles). Pricing pressure for vehicles is growing rapidly due to both gas and labor costs - both of which are mostly non-existent for Bird which will make their product more attractive to more riders.
  

I'm sure I missed some macro items here, but enough of that, I'll now enumerate my personal theories as to why I think BRDS is a good buy.

• Given the most recent quarter was positive EBIT and there appears (if you squint really hard) to be a path to being cash flow positive, we can more confidently run them through a 5 year DCF using analysts expectations. This gives an approximate current value of $3.9, or almost 5x where BRDS is today.
  
• Look at that downtrend at the top of the post! I mean, yikes, someone is really shorting this bad boy and hard. I think these shorts likely fall into one of two categories:
  A) They think they don't need to close out their shorts because BRDS will go bankrupt and viola, they just keep all the proceeds from the original short sale
  B) They think they've made enough and they are starting to unwind their positions (more on this later) before they get caught in a massive short-squeeze. All it would take is one blip of extraordinary news to cause the price to jump 30-50% in a day.
  
• They are a prime acquisition opportunity. I think the most obvious here is that they go private at something like a 1.2-1.5B valuation, thats up 5.6x-7x where the current price is today. Why would this happen? Well, it would be a lot easier for a private management firm to inject the extra $300-500M in cash that the company needs to complete its transformation to be cash flow positive as well as to increase growth by 3-4x before going public again in 3-5 years at which point it would easily be worth $4-5B. I could also see Elon buying BRDS so he can slap a new TSLA battery pack in them and increase the longevity of each vehicle by 10x. I'm sure he could secure funding at $4.20 per share.
  
• Finally, volume has been increasing recently while price has maintained support within a buy zone, this can clearly be seen on the two hour timeframe. This buy zone has held steady even as the overall market had tremendous volatility. As described above, I think this is a major firm that has been short BRDS closing their position and using their size to manipulate the market to prevent a major uptick in price while they unwind. See here:
  
  

So where do I think this is going? My first target is $3. That's my target because it is 4x upside, still below the value of what the DCF says it should be and it just so happens to correspond perfectly with the .236 fib retracement as seen in the chart.

An option for options?
Oh, and did I mention the options prices? January 2023 $2.50 calls are trading for $.08 right now. This is kind of insane considering that if this company hits positive EBIT the next 2 quarters this stock could EASILY hit $4 by January (for you less math-inclined folks, that would be an 18x return on the options). On the flip side, that also means that doing a buy-write on BRDS right now and selling that Jan 2023 as a covered call gives you 10% off the current price (.08 / .75) while still giving you 3.33x upside. Mind boggling.

Be greedy when others are fearful.