AMTD Digital (HKD) advances to $2,000 in seventh consecutive gaining session

UPDATE: HKD stock is ahead by 7.8% in the first hour of Wednesday's session. This week's favourite meme stock could make its seventh straight advance if it retains its gains made thus far. AMTD Digital stock opened ahead of the premarket at $1,900 before driving as high as $2,000 and then quickly tumbling to $1,740. About 40 minutes into the session it began a renewed climb and is now trading at $1,810. Despite the entire market making jokes about the metaverse investment platform being valued at more than Disney, the stock and its investors cannot seem to budge. Its parent company, AMTD IDEA Group (AMTD), is trading up 15.6% at $8.09 at the time of writing.

• AMTD Digital stock has rallied over 33,000% since July 15 IPO.
• HKD stock traded as high as $2,589 on Tuesday.
• AMTD Digital closed at a value of $310 billion on Tuesday.

Forget about PayPal (PYPL). Forget about Advanced Micro Devices (AMD). Forget about SoFI (SOFI). The stock of the week is AMTD Digital (HKD). The little known Hong Kong-based investment banking company that created a digital platform called AMTD SpiderNet saw its stock exploded as much as 33,092% since its IPO on July 15.

The market began to take notice this week as its market cap soared into the stratosphere and entered the ranks of the top 15 highest-valued companies. Yes, you read that right. At least briefly it was up there with ExxonMobil, the company that routinely pumps 4 million barrels of oil a day. It was also momentarily worth more than Walmart (WMT), the $360 billion behemoth that ranks as the largest retailer in the world.

Also read: Citi Stock Deep Dive: Earnings, Buffet factor support our BUY rating and $60 price target

Shares of HKD finally had their blow-off moment on Tuesday, and a high of $2,589 sold off to close at $1,679. This still amounted to a 126% advance. Now on Wednesday the premarket is showing a more than 18% gain to $1,990. It would seem there is still an appetite to push this big boy back above the $2,000 threshold.

When AMTD Digital (HKD) went public on July 15, it sold 16 million American depositary shares for $7.80 each. The stock then opened at $13 right from the jump. The $7.80 price tag means that AMTD Digital and its underwriters agreed it was worth about $1.4 billion at the time.

Acknowledging the strange disconnect with its share price, AMTD Digital issued a statement on Monday morning.

"During the period since our initial public offering, the Company noted significant volatility in our ADS price and, also observed some very active trading volume," reads the statement. "To our knowledge, there are no material circumstances, events nor other matters relating to our Company’s business and operating activities since the IPO date."

The main issue appears to be that though the stock has 185 million total shares, only about 19 million (the float) are available to trade. There is also no ability to short the high-flying stock.

AMTD Digital news

AMTD Digital is a subsidiary of Hong Kong-based AMTD IDEA Group. The subsidiary runs an investment bank out of Hong Kong as well as a related asset management platform. The firm also brokers insurance products and consults on strategic investments. Like a normal investment bank, AMTD Digital appears to help Hong Kong and mainland Chinese corporations and startups access capital from mostly foreign markets. It runs a platform called AMTD SpiderNet, which connects these startups to capital, and the platform may have a metaverse component to it. Why, you ask? We have no idea.

AMTD Digital is now worth roughly $310 billion. Parent AMTD IDEA Group (AMTD) also rallied 236% on Tuesday to garner a nearly $14 billion valuation.

Based on trailing twelve-month earnings per share of $0.93, AMTD Digital has an unusual 1,805 price-to-earnings ratio. Take that Celsius (CELH)!

The company, which makes money from investment banking and SpiderNet platform fees, saw its revenue grow by about 1,000% in 2020, but that fell to growth of 17% in 2021. This year growth is nearly flat. AMTD Digital's IPO brought in about $125 million, which amounted to the largest listing by a Chinese company this year.

AMTD Digital stock forecast

The 1-hour chart below shows us that HKD has been riding the 9-hour moving average. Going into Wednesday, this gives traders a support of sorts at $1,640. Obviously, this is a volatile and dangerous stock that is worth no where close to its current value. A sell-off has to happen sometime, and when it does occur, expect shares to lose as much as 90% in a single session.

Tuesday's blow-off top is typically a sign that the range high has already been hit. When there is a wick about $1,000 in length, it truly means the market thinks the stock is worth nowhere near what it is trading for. 

HKD 1-hour chart

When will HKD stock sell off and end its run? It pretty much has to by August 15. That is when its underwriters are allowed to purchase as much as 2.4 million additional shares at the original price of $7.80. This amounts to about 12.6% of the float and should lead to heavy selling. Of course, the daily chart below shows that accumulation has already halted just above 6.8 million shares, so this is another data point pointing to the end of the rally.

HKD daily chart