Is Blockchain Software Stock DatChat (DATS) a Buy Under $8?

DatChat, Inc. (DATS) is a blockchain, cybersecurity, and social media company that has created software that provides users the ability to communicate and share with a high degree of privacy and protection. The company’s main product, DatChat Messenger & Private Social Network, is powered by a decentralized messaging & digital rights management blockchain.

DATS made its debut on the Nasdaq on August 13th by selling about 2.89 million shares at $4.15 a share. Important to note, the stock opened at $3.42 on its first trading day and has rallied 130% since then. 

In this article, I am going to analyze DatChat’s qualitative and quantitative metrics to determine whether it presents a buying opportunity.

Industry Outlook 

According to the company’s S-1 report, in 2021, the number of mobile phone messaging app users was 2.7 billion worldwide. That figure is expected to rise to 3.51 billion by 2025, emarketer reports. However, while the company should be able to capitalize on this growth, DATS also faces competition from well-established industry players such as Snapchat, WhatsApp, Telegram, Facebook messenger, and others. 

Recent Developments 

On September 2nd, DATS announced its Gold partner status for the blockchain technology conference, Blockchain Expo North America, taking place online September 29th-30th. This Gold sponsorship offers to place the company’s logo and description on the conference website as well as speaking opportunities in the event. In my view, it’s a brilliant marketing move, allowing to introduce the company to a broader audience. Following the announcement, DATS shares surged about 3% during the pre-market session. 

On August 26th, DATS announced that it has entered into a partnership with Rutgers University Computer Science through Industry Affiliates Program. Under the terms of the deal, the company will receive access to Rutgers research presentations and “up-and-coming engineering talent“. DatChat will attract the brightest young minds to solve unusual and sophisticated challenges in technology.

DatChat’s Financial Performance  

Let’s take a closer look at the company’s S-1 report to dive deeper into financials and growth prospects. It is worth mentioning that the company did not generate any revenues during the three months ended March 31st, 2021, and all of 2020. According to its growth strategy, the company plans to grow its user base and then monetize its apps.

The company’s key product, DatChat Messenger & Private Social Network, is a messaging application with an emphasis on privacy and security. DATS currently has approximately 22,572 Monthly Active Users (“MAUs”), 73.6% of which are Android users. The company could potentially monetize its app in two ways: add in-app advertising or add subscription-based services. DatChat’s application has a superb competitive advantage compared to its peers due to the Anti-Screenshot Protection feature. This option allows users to limit the recipient’s ability to take and save screenshots of the message.

The company is currently developing additional features such as font color change, emojis, and the ability to see who liked or disliked a user’s post or comment.  

Liquidity Position

As of March 31st, 2021, the company had total cash on hand of $1.63 million as well as about $11.48 million in net proceeds raised from the IPO, while its total debt stood at just $30,618. Cash used to run the company’s operations during the first quarter of 2021 was $650,231, up about 140% compared to the 1Q2020 figure. However, the current funds should be enough for at least 12 months of the company’s operations. 

The Bottom Line

I am neutral on DATS.  Though the company looks promising, it has not generated any revenues in the past two years. I will be closely monitoring DATS user base growth, as well as monetization and marketing developments in the coming quarters before investing.