Summary:
Semler Scientific stock surged 24.5% in October due to Bitcoin investments.
The company now holds 1,058 Bitcoins, valued at $76 million.
Approximately 35% of Semler's market cap is derived from its Bitcoin holdings.
The medical device segment saw a 17% revenue decline year-over-year.
Investing in Bitcoin poses volatile risks for Semler's future.
The medical device company has made a peculiar bet on a popular cryptocurrency.
Semler Scientific shot up 24.5% in October, according to data from S&P Global Market Intelligence. The medical device company has started buying up Bitcoin with cash on its balance sheet, which is correlating its stock price to the popular cryptocurrency. Even after the price jump last month, the stock is still down 35.4% in the last five years as it saw slowing revenue and declining operating margins.
Adding Bitcoin to the balance sheet
The reason Semler Scientific stock jumped in October had nothing to do with its underlying business. In fact, the company had no material updates to give investors in the month. The only reason the stock rose is because management has decided to put most of the company's liquid assets in Bitcoin. In October, the price of Bitcoin rose to over $72,000, or close to an all-time high. In its recent quarterly update, Semler Scientific told investors that it now owns 1,058 Bitcoins, which equates to a value of $76 million at a Bitcoin price of $72,000.
This is a large portion of Semler Scientific's market value at the moment. As of this writing, the company has a market cap of $219 million, meaning 35% of its value is derived from its Bitcoin holdings. If the price of Bitcoin keeps going up, Semler's stock will keep going up. It's that simple.
How is the healthcare business doing?
Even though Semler Scientific seems to have fallen in love with Bitcoin, the company still operates a medical device segment with its QuantaFlo product, serving the peripheral artery disease (PAD) market. Revenue for the division over the last 12 months is $61.7 million and fell 17% year over year in the third quarter. Declining revenue is never a good thing, and this could be why Semler Scientific has pivoted to investing in Bitcoin.
However, the company is still posting positive operating income, and has been for the last five years. Last quarter, it had a positive operating income of $5.1 million and $22 million over the last 12 months.
On the whole, Semler Scientific has taken a big risk with its business. Investing in Bitcoin can be volatile as the price can move up or down in rapid succession, and it is not guaranteed the company will make money with its operations. For now, its medical device division is generating a profit, but the revenue declines should be a big concern for shareholders. There's no reason to invest in Semler Scientific after its pivot to Bitcoin.
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