Semler Scientific, Inc. (NASDAQ: SMLR) has been one of November’s hottest stocks, soaring over 130% as investors rally behind its newfound embrace of Bitcoin. The healthcare and medical devices company recently made waves by significantly expanding its Bitcoin holdings and introducing "Bitcoin Yield" as a key performance indicator (KPI).
With Bitcoin hovering near the psychological $100,000 level, SMLR has become a speculative favorite, joining the ranks of crypto-related stocks like MicroStrategy (NASDAQ: MSTR) and MARA Holdings (NASDAQ: MARA). But does SMLR represent a legitimate Bitcoin play, or is this momentum short-lived?
What Is Semler Scientific?
Although the company has drawn attention for its Bitcoin purchases, Semler's roots lie in healthcare, not cryptocurrency. Semler specializes in providing technology solutions to improve the clinical efficiency of healthcare providers in the United States.
Its flagship product, QuantaFlo, is a four-minute, in-office blood flow test used to evaluate patients’ vascular health. This diagnostic tool is a staple for healthcare providers aiming to improve early detection of vascular conditions. Additionally, Semler offers Insulin Insights, a software platform that helps optimize outpatient insulin dosing. Despite its recent pivot toward Bitcoin, Semler's core business remains firmly tied to the healthcare sector.
Semler's Big Bitcoin Bet
In November, Semler made headlines by significantly increasing its Bitcoin holdings as part of its treasury strategy. The company purchased 215 Bitcoin for $17.7 million, bringing its total holdings to 1,273 Bitcoin acquired at an average price of almost $69,700. The recent purchase was partially funded by an at-the-market stock offering that raised $21.5 million by selling 505,544 shares.
This bold move positions Semler as a company actively leveraging equity to expand its Bitcoin portfolio. While it’s not a pure-play cryptocurrency stock like MicroStrategy, its growing Bitcoin holdings have captured investor attention, making it a unique hybrid between healthcare and digital assets.
Bitcoin’s Impact on Semler's Earnings
Semler's Bitcoin holdings played a significant role in its Q3 earnings, helping the company surpass expectations despite challenges in its core business. The company reported diluted EPS of 72 cents, significantly beating the 48-cent forecast. This outperformance was primarily due to $1.1 million in unrealized gains from Bitcoin and cost-cutting measures.
However, underlying operational results paint a less optimistic picture. Revenue declined to $13.5 million in Q3, down from $16.3 million in the same period last year. QuantaFlo, the company’s primary product, saw declining revenues, reflecting struggles in market expansion and customer retention.
The company’s pivot to Bitcoin may be a response to these headwinds. By adopting a Bitcoin-focused strategy, Semler aims to diversify its earnings and attract investor interest, but it’s unclear if this approach can offset the challenges in its core business.
A Balancing Act: Potential Rewards and Risks
Semler's embrace of Bitcoin presents both opportunities and risks. On one hand, the company’s Bitcoin holdings have significantly boosted investor sentiment and created a speculative buzz. With Bitcoin trading near all-time highs, further gains in cryptocurrency prices could drive additional upside for Semler.
On the other hand, Bitcoin’s volatility poses a substantial risk. A significant downturn in cryptocurrency markets could negatively impact the company's earnings, particularly given the unrealized gains that have bolstered its recent results. Additionally, Semler's core business faces persistent challenges, with declining revenues and limited expansion in its customer base.
The stock's coverage is also limited, with only one analyst providing ratings. This lack of broader institutional attention could limit its appeal to more risk-averse investors.
