System1 (NYSE: SST) is trending on social media after delivering explosive debut earnings. The surprise earnings growth sent SST stock up close to 100% intraday, reaching over $37 per share on Tuesday.

SST stock is on the move again today after pulling back below $24 as investors hope to capture the momentum. Meanwhile, social media traders suggest it may have more room to run as a short squeeze.

Since debuting on the New York Stock Exchange (NYSE) in January, the modern marketing firm has been busy. System1 merged with SPAC Trebia Acquisition Corp to publicize its powerful marketing platform (RAMP).

In February, the firm earned Microsoft’s prestigious 2021 Advertising Supply Partner of the Year Award. After buying several companies, System1 is on track to deliver even more growth this year.

 Is now the time to buy SST? Keep reading to learn why System1 is trending and what to expect next.

SST stock forecast.

 

Why Is SST Stock Trending?

In the fourth quarter, System1’s business grew by leaps and bounds. The huge earnings growth is attracting new traders and investors. Here are a few highlights from the report.

  • Revenue grew 48% to $239M compared to $161M last year.
  • Net income surged 340% from $7M to $31M.
  • Adjusted EBITDA (Earnings Before Interest, Depreciation & Amortization) rose 65% to $127M.

Full-year results were also impressive, with over 2,400% net income growth. But it was the company’s guidance for the year that caused SST stock to rally. For one thing, System1 is expecting another 20% revenue growth in 2022, reaching $1B in sales. Moreover, the firm anticipates adjusted EBITDA to reach $174M, or 37% growth YOY.

The upbeat guidance lured investors, igniting a fire underneath System1 stock. As a result, traders took to social media to promote a short squeeze. When a stock has a large portion of shares short, a catalyst can easily spark a rally as shorts look to cover their positions.

Furthermore, with a low float, the move can be parabolic. In other words, fewer shares available and more people betting against a stock can create the right combination for a huge run.

The latest data shows SST stock with almost 20% short interest and over 35% off-exchange short volume ratio (SVR). Although this is much lower than the close to 80% SVR at the end of March, it’s still relatively high.

What Does System1 Do?

Before jumping into a stock because of a technical setup, you should still know what the company does. For System1, the goal is simple, to connect advertisers to the right consumers at scale. The two keywords here are “right” consumers and “scale.”

The company operates a powerful Responsive Acquisition Marketing Platform (RAMP) using state-of-the-art technology. RAMP uses machine learning and intent data (sales intelligence) to access and discover high-quality customers.

The platform learns from customer buying behavior and can match brands to those users in specific markets. As a result, businesses can connect with the right users to grow their brands.

System1 operates across 100s of markets, including finance, search and travel. For example, a few of the company’s brands include:

  • MapQuest
  • com
  • Wallet Genius
  • Coupon Follow

On top of this, it works with every major digital ad network, such as search, display, video, commerce and subscription. And lastly, System1 prioritizes privacy. The marketing firm offers security software, a private search engine and a privacy-friendly browser.

SST Stock Analysis

SST stock started building momentum again after crashing back to under $20 a share, reaching over $34 today. But the roller coaster ride continues as SST shares are fading, down another 12% at this time.

At the same time, the run-up is causing System1 stock to reach extremely overbought levels on the relative strength index (RSI). For this reason, it should be no surprise the pullback happened as quickly and viciously as it has.

Even with the pullback, share prices are still up 60% from before earnings. Nonetheless, SST is falling nothing short of meme stock status at this point. With this in mind, will the stock be able to find support?

As a newly listed company finding support and resistance levels can be challenging, especially after a low float stock explodes on earnings growth. Therefore, huge gaps can happen, creating trading pockets.

When this happens, prices can run up and down rapidly until buyers and sellers find common ground. Until we see a clearer picture of the company’s earnings ability, expect more volatility ahead.

A Few Risks to Note

Even though the growth and guidance going forward are exciting, SST stock has several risks. For one thing, tech stocks are down significantly this year with rising interest rates. Investors will generally pay a premium for tech companies with big future earnings expectations.

Another key thing to consider is the flashing signs of an economic slowdown. For example, rising inflation and the two-year Treasury note moving below the ten-year are major indicators.

And lastly, with higher expectations, an earnings miss could be detrimental. The growth is priced in now, and if the company fails to deliver, investors may jump ship.

Is It Worth Investing in SST Stock?

At this point, if you missed the SST rally, there is no need to worry. Shares are dropping again, currently down 35% from their highs earlier this week.

If the company achieves the growth it anticipates, this should only be the beginning. But, until we learn more about the company’s ability to produce, you can expect more volatility.

System1’s debut earnings report was impressive. Can they deliver again next quarter? Investors are debating this as SST stock continues to whipsaw. If the company can generate $1B this year as they expect, investors may rethink shorting it.

Then again, with inflation soaring, will we see a return to the service economy? The consumer shift can boost System1’s business as we advance.

However, there are several risks to consider before investing in SST stock. Low float runners are not for everyone. They can deliver massive returns and then give them back even faster. So, the risk to reward is something you will need to think about and how willing you are to leave your money until the growth is achieved.