MMAT stock has catalysts but has a bloated valuation
Smart Materials Company Shares Metamaterials (NASDAQ:MMAT) have gained over 60% in the past month. This is due in large part to the retail interest in the stock. Its short volume ratio was over 50% at one point in August. However, with speculative trading prospects and a bloated valuation, MMAT stock should be avoided at this point.
Meta Materials is a start-up company focused on building advanced materials to help companies develop advanced technologies. He went public via a reverse takeover with a small energy company Torchlight energy resources in June. Since then, its stock has climbed 131% in value.
There have been a few catalysts outside of short squeeze, which impacted the value of MMAT stock. Regardless of their impact, the stock’s valuation is remarkably high at this point. Trading at 326 times sales over 12 months, the stock has become incredibly overvalued.
Meta Material management spoke of the multi-million dollar market opportunity for the company driven by multiple megatrends. The metamaterials market is expected to reach a $ 10.7 billion by 2030. If you combine the industry with other related industries like aerospace, energy, medicine, and IoT, things get even more lucrative.
The the company has filed 149 patents, of which 82 were granted. In addition, it has eight registered trademarks. Its processes and methods developed over a decade were patented very early and have provided a multi-year competitive advantage.
On August 5, the company announced he agreed to acquire Nanotechnology security for approximately $ 90.8 million. The acquisition will help Meta Materials speed up and reduce risk in the production process. Nanotech offers nano-coating production equipment, artistic electron beam lithography and roll-to-roll nanoimprint lithography. In addition, Nanotech brings several complementary technologies in the fields of 5G, solar energy and carbon capture.
In addition, the company also announced that it had has partnered with SystemX from Stanford University Alliance program. It provides companies with “a very efficient and cost effective method to sponsor pre-competitive and collaborative research at Stanford.” Meta Materials hopes to sponsor the research of Stanford students and recruit them into the company. The participation also projects Meta Materials in a positive light. Meta Materials CEO George Palikaras says, “With META’s growing footprint in Silicon Valley, we are extremely excited to join the SystemX Alliance. “
Finally, the company is also developing a team of experts within a scientific council. He expects the group of scientists to be a major growth catalyst for the company in driving innovation. Another objective of the board is to identify new opportunities for mergers and acquisitions.
Outlook and final word on MMAT stock
MMAT shares have enjoyed good progress since their IPO in June. As mentioned earlier, most of these gains were due to the retail frenzy, which caused a stir in the stock market this year. However, the short-term interest in MMAT stocks has largely evaporated and the focus is now on the fundamentals and future prospects of the company.
While there is a lot to love about the business, it is still a deeply unprofitable business, which has lost over $ 50 million in the past 12 months. Additionally, he spent over $ 9 million in cash, with earnings just over $ 1 million. Signs of growth are minimal and the path to profitability looks incredibly bleak at this point. It recently released its second quarter results, where revenue was only $ 624,000, and it lost $ 5.6 million in cash flow.
Despite dismal financial performance, MMAT shares are trading at mercurial levels. Therefore, it is better to avoid such speculative investment at its current high valuation.
As of the publication date, Muslim Farooque does not have (directly or indirectly) any position on any of the titles mentioned in this article. The views expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines