Are we in the middle of a once-in-a-lifetime chance to buy RC365 shares?

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RC365 (LSE:RCGH) shares might be the hottest London Stock Exchange-listed investment right now. The former penny stock has delivered an astronomic return for shareholders recently, thanks to 483% share price growth over the past two months.

So, what does the company do? What’s behind its spectacular performance? And could this be a once-in-a-lifetime chance to buy a growth stock darling, or might this saga end in tears?

Let’s explore.

An eclectic business

RC365 is a fintech business that focuses on payment gateway solutions as well as IT support and security services. The company’s core customer base is concentrated in Hong Kong and China, spanning both individuals and SMEs.

The firm aims to facilitate the cross-border banking needs of the Asian community via its payment services. Separately, it advises business customers on cybersecurity issues such as hacking and service interruptions.

In addition, RC365 offers augmented reality and virtual reality branding services to clients in the catering and entertainment industries. The company also operates a peer-to-peer platform that connects maids with prospective employers.

Financial results

With a market cap just shy of £155m as I write, RC365 isn’t a large company. As of 26 July, it had a cash position of around HK$20m in the coffers (that’s a touch above £2m).

One highlight from the latest full-year results was a doubling in revenue to HK$16.9m. This growth is impressive, but RC365 isn’t a profitable business. Losses increased 38% to HK$5.4m.

Since the company’s only been publicly listed for just over 16 months, there’s a lack of information available to potential investors. That makes me cautious.

AI hype

The little-known firm has attracted substantial investor interest off the back of a number of sponsored online articles. It’s fair to say they make bold claims, suggesting buying RC365 shares today could be akin to investing in AI chip-maker Nvidia before its astronomic rise.

The group recently reached a non-binding memorandum of understanding with Hatcher Group to develop ‘smart algorithm’ technology. It also signed a collaboration agreement with a Hatcher subsidiary to upgrade its wealth management solutions app. Plus, the company has reached agreements with Mastercard on branding and prepaid card services.

But these deals aren’t enough to quash my scepticism. The AI buzzword is all the rage these days — and for good reason. Technological developments currently under way have the potential to revolutionise not only the economy, but wider human society as we know it.

However, I have yet to see clear evidence indicating RC365 is a company that can be at the forefront of these trends. Granted, the business appears to be making good progress in enhancing its offering. Nonetheless, I’m not convinced the soaring valuation can credibly be justified since it’s not clear to me how its payment solutions will harness the power of AI.

What I’m doing

RC365 shares could surge higher. But, I’m conscious there’s a significant risk the share price has been pumped up on speculation and frenzy rather than concrete fundamentals. The rise simply doesn’t look sustainable to me.

I may end up with egg on my face if the company goes on to achieve great things, but for now I’m happy to forgo what could be a once-in-a-lifetime chance to buy this stock.

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