Estimated read time: 4 minutes
Publication date: 2nd Nov 2021 11:32 GMT+1
Shares of Canada-based Meta Materials (NASDAQ: MMAT) have experienced a significant uptick in trading volumes in recent sessions. According to a few media outlets, the popularity of Meta Materials can be attributed to a case of mistaken identity. As tech giant Facebook (NASDAQ: FB) rebranded its parent company to Meta, MMAT stock gained 6% last Friday in opening trade after a 26% rise in after-hours trading a day before.
But MMAT stock was already trending on social media platform Reddit, where retail traders orchestrated a short-squeeze on the company. In fact, shares of Meta Materials rose from $0.56 in November 2020 to a record high of almost $20 this June. At the time of writing, Meta Materials is trading at $4.95 per share, valuing the company at a market cap of $1.38 billion.
In the last year, MMAT stock has surged by 784% and is up 250% in 2021. But should this tech stock be part of your portfolio right now?
An overview of Meta Materials
Meta Materials is a smart materials and photonics company that invents, designs, develops, and manufactures functional materials and nanocomposites. Its products include metaAir a laser glare protection eyewear as well as NANOWEB which is a transparent conductive film. It also offers holoOPTIX which is a holographic optical component. These products are used in multiple industries that include aerospace and defense, automotive, consumer electronics, medical applications, and energy.
As stated above, the stock has attracted interest from Reddit’s WallStreetBets and other online investment communities that target meme stocks with a high short interest ratio. While MMAT is focused on developing advanced materials that have a wide range of applications and enable technology-based innovations, its currently swinging wildly due to the short squeeze momentum.
Recent quarterly results
In the second quarter of 2021, Meta Materials reported revenue of $624,320 which was an increase of 197% year over year compared to revenue of $210,344 in the year-ago period. In the first six months of 2021, sales rose by 88% to $1.22 million compared to $650,683 in the prior-year period.
MMAT reported a net loss of $0.03 per share or $5.18 million in Q2 compared to a net loss of $0.01 per share or $1.81 million in Q2 of 2020. Its net loss also widened to $49.33 million in the first six months of 2021, from a loss of just $3.23 million in the year-ago period.
The net loss included a one-time, non-cash loss of $40.54 million on financial instruments. The net cash used in operating activities in the first half of 2021 rose to $5.6 million from $4.46 million while capital expenditures in the last two quarters totaled $3.31 million.
MMAT ended Q2 with a cash balance of $154 million giving it enough room to invest in CAPEX and support its cash burn at current levels.
Meta Materials acquires Nanotech Security Corp.
Meta Materials recently closed the acquisition of Nanotech Security which is involved in the development of secure and visually memorable nano-optic security features that provide anti-counterfeiting solutions used in the government and banknote markets.
The acquisition was valued at $91 million and MMAT’s Chairman of the Board, Ram Ramkumar stated, “META is focused on growth and extending its leadership position in commercializing metamaterials. Nanotech’s highly skilled team and well-established, cost competitive production capability will complement our technology platform enabling a faster scale up into existing applications and position the Company for expansion into new verticals as well.”
The two companies will develop and manufacture intelligent surfaces and solutions for customers and is expected to add a new dimension to enterprises part of the automotive, healthcare, aerospace and consumer electronics vertical.
The key takeaway
We can see that MMAT generates negligible revenue and does not command a billion-dollar valuation. Looking at its Q2 sales, annual revenue run rate will be $2.5 million in the next year, valuing the MMAT stock at a forward price to sales multiple of a staggering 550x. There is a good chance the stock will pull back significantly given its sky-high valuation.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
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