Some Pieces are Missing, But the Puzzle of HOFV Stock is Coming Together Earlier this summer, I suggested that Hall of Fame Resort & Entertainment Co. was a speculative stock worth considering. After the company's third-quarter earnings report, I stand by that suggestion.

By Chris Markoch

This story originally appeared on MarketBeat

Depositphotos.com contributor/Depositphotos.com - MarketBeat

Risk-tolerant investors can look at HOFV stock as an under-the-radar penny stock play

Earlier this summer, I suggested that Hall of Fame Resort & Entertainment Co. (NASDAQ: HOFV) was a speculative stock worth considering. After the company's third-quarter earnings report, I stand by that suggestion. HOFV has three distinct verticals: media, gaming, and on-site asset creation. And each has a link to the popularity and growth of the National Football League.

Although the Pro Football Hall of Fame is a separate legal entity from HOFV, the two share a common cause. And if you listen to the earnings call, you'll hear the word synergy mentioned a lot. The company's media and on-site asset creation will be able to leverage its relationship with the Pro Football Hall of Fame. One example of this is the company's partnership with Dolphin Entertainment (NASDAQ: DLPN) to offer non-fungible tokens (NFTs) that can take advantage of the growing market for sports collectibles.

I'd encourage you to listen the company's earnings call. When you do, you'll realize that there are many things to be excited about. One of those is the potential for sports betting if the state of Ohio legalizes sports betting.

With that said this is a company that is still in the early growing stage. However, that's not to say this is a pre-revenue company. The company does have a small amount of revenue coming through the door. In the quarter ending on September 30, 2021, the company generated $3.5 million in revenue. This was a 108% increase from the prior year and a 47% increase from the prior quarter.

A Difficult Time to be a Picks-and-Shovel Stock

As I wrote earlier this summer, this is a picks-and-shovel play on the country's interest in the National Football League (NFL). And that's where this story gets scary for some investors. Simply put, the company has about $28.5 million on its balance sheet, but will need significantly more financing as it continues to build its on-site infrastructure.

Signing a term sheet with Erie Bank for up to $25 million will help to unlock additional public and private financing and helps the company execute its "just-in-time financing" concept.

And on the earnings call, CEO Michael Crawford pointed out that the company has taken out an at-the-market (ATM) offering. This is a reversal from the position that the company took earlier this year. Crawford says that, at the moment, the company has not tapped the offering to a great extent and so it continues to offer them with the ability to access financing as it's needed.

However, like many other companies, HOFV is not immune from construction delays due to supply chain bottlenecks. That has pushed the company's timeline back into 2022 for the completion of some of its projects. And at this point, the potential of this vertical is somewhat at the mercy of the existing supply chain delays.

The Bottom Line on HOFV Stock

The concept of the whole being greater than the sum of its parts is an apt way of looking at HOFV stock. If you look at any one part as a stand-alone driver of revenue, the opportunity is less appealing. Construction costs and supply chain delays are going to drag on the physical infrastructure. Legalization of sports betting is not a sure thing.

Those are all valid risks. But when you consider how all the parts can work together, the potential gets put into focus.

I define a penny stock as one that's trading for less than $5. Whether that fits your definition or not, we can all agree that's HOFV is a low-priced stock. That means it doesn't take much to swing the stock significantly in one direction or another. That's been the case in 2021 and some investors are holding a heavy bag, particularly those who bought shares at $6 earlier this year.

If you're one of those investors, I'm not going to be the one to bring you a cup of holiday cheer. You may be waiting awhile. However, if you aren't involved in the stock and have money you can put at risk, now may be the time to take a small position.

Editor's Pick

Related Topics

Business News

Costco Isn't Facing Devastating Surges in Theft Like Target and Walmart — and the Reason Is Very Simple

The retailer's CFO revealed its strategy during a fourth-quarter-earnings call.

Business Solutions

Get This ChatGPT Educational Bundle for $40 Off

Save $40 on this bundle and start running your business more efficiently.

Leadership

Trust Should Be the Foundation of Your Business — Here's How to Earn It.

Here are five areas entrepreneurs and business leaders should tackle and invest more in to fuel a reputation for being incredibly reliable, which will help you drive greater customer trust, loyalty and success.

Starting a Business

5 Solopreneur Mindset Shifts and Why They're Critical to Your Success

As a solopreneur, don't reinvent the wheel or start from scratch. You are here because you have two things: an idea and passion.