Shares of Webull (BULL) stock soared as much as 500% last Monday following its Apr. 11 merger with special purpose acquisition company (SPAC) SK Growth Opportunities. It hit an intraday peak of $79.56 per share, a 500% gain from its previous close of $13.25 per share, giving it a $30 billion market valuation.
Since then, though, it's been a steady, daily decline for the online, app-based brokerage. It ended the shortened trading week at $26.33 per share, a 67% drop from peak to trough. Even at this reduced price, it's not a discounted stock and investors should avoid buying BULL stock.
Webull is a Chinese stock trading platform founded by Alibaba (BABA) and Xiaomi executive Wang Anquan, though the new company has its headquarters in Florida. It has been under scrutiny from the House Select Committee on the Chinese Communist Party since November when it received a letter questioning its ties to the government.
Amid heightened trade and geopolitical tensions between Washington and Beijing, BULL stock carries a lot of geographical risk.
Beyond politics, though, there are other reasons to avoid BULL stock. The platform has 23 million users, an 18% increase year-over-year, generating $460 billion in notional volume and 461 million option contracts traded through the Webull platform annually.
Yet 2023 revenue was essentially flat at $390.1 million, and through the first nine months of 2024, it's actually down 7.6% from the year-ago period at $282.5 million. It is also generating adjusted operating losses of $3.4 million over the first three quarters compared to profits of $60.6 million the year before. Net losses of $33.8 million are 75% worse than in 2023.
Despite this, BULL stock trades at 3 times sales and 60 times free cash flow. That's better than at its peak price, but still overvalued.
While Robinhood (HOOD) also has a bloated valuation, that's no reason to buy. Charles Schwab (SCHW) is more attractively valued at 15x earnings estimates and 9x FCF.
Because there are so many unknowns about BULL stock, its business is not growing despite adding users, and its valuation remains inflated, investors should avoid buying Webull stock.
