Shares of Lizhi (LIZI -3.39%) were soaring 22% in afternoon trading Tuesday after Citron Research said the Chinese internet audio platform should triple in value.
Citron is a former short seller run by Andrew Left whose often well-researched reports could sink a stock when a critical analysis of a company was issued. However, Left was burned by the massive GameStop (GME 0.48%) short squeeze earlier this year, which caused him to effectively give up issuing bearish reports and instead turn his focus to finding stocks he believed were worth buying.
Lizhi is now the beneficiary of a positive, upbeat forecast from the stock-research site.
Calling Lizhi "a cross-section of Clubhouse, Roblox, and NOW dating," Citron said the audio app's decision to enter the dating market through its top-ranked gaming app Tiya should have its stock trading at $30 per share.
Yet simply entering a new vertical does not convey leadership on a business. There are plenty of instances of a market share-leading company expanding into a new opportunity without gaining much traction.
Facebook (META 4.21%), for example, entered the dating scene with the launch of Facebook Dating, and it has yet to make a dent in the lead of Match Group (MTCH -1.91%) or the recently IPO'd Bumble (BMBL -1.13%).
Lizhi stock traded as much as 45% higher from where it closed yesterday because of the report but has since pared those gains. Now the audio app needs to prove it is worth that leap of faith.