Atomera Inc. (ATOM): A Trading, Not An Investment Vehicle

Based upon the idea that Atomera Incorporated (NASDAQ:ATOM) to be always one deal away from breaking out and scaling its business, a number of investors have taking positions in the company with the idea there is a big pay day ahead.

That has been at times thought to be justified because some traders took a position in the company at a favorable entry point and did very well in a relatively short time. In the minds of some, that idea reinforced their thesis that ATOM has a lot of upside once the news comes out on wins that will drive licensing fee and royalty revenue.

But with quarter after quarter and year after year of promises, it appears its core MST product doesn’t have any legs, and long-term shareholders are likely to continue to get crushed, albeit with the occasionally jump in share price based upon a press release.

With no revenue from its asserted core product, and no legitimate visibility that it’s going to change in the near future, other than commentary from management, I see ATOM as being a good trading stock, but nothing else.

Latest numbers and management comments

There really isn’t much to the third quarter earnings report of ATOM in relationship to numbers since it didn’t generate any revenue, but it did incur a net loss of $4.6 million, or ($0.20) per share, compared to the net loss of $4.2 million in the third quarter of 2021.

Adjusted EBITDA in the reporting period was a loss of $3.7 million, versus an adjusted EBITDA loss of $3.4 million in the same quarter of 2021.

At the end of the quarter the company had $23.3 million in cash and cash equivalents, compared to $28.7 million at the end of calendar 2021. The only good news there is the company does have some leeway to continue operations while it tries to win some business.

The most important part of the earnings report in my opinion was the comments by CEO Scott Bibaud concerning the favorable industry conditions that lend itself to ATOM’s business model and core MST product.

Before I comment on what he said, I want to briefly define what MST is. I stands for Mears Silicon Technology, which presumably boosts “performance and power efficiency in semiconductor transistors.”

MST is supposed to enhance the results of semiconductors by lowering costs and power while increasing the performance of the transistors.

Here’s what the CEO said:

Progress with customers and R&D efforts continue to build on the momentum generated in the first half of 2022. The semiconductor industry’s current slowdown provides a fertile environment for adoption of MST as customers seek out ways to gain competitive advantage through lower product costs, higher yield and better performance, from legacy nodes through the bleeding edge. Atomera is actively working with customers on concrete plans to bring MST from the lab to the fab.

The reason why this is important is because for years the company has pushed further and further out the expected adoption of MST by the industry, and after years of promises and assertions, this about as clear a statement I’ve heard from management on the belief the current economic environment lends itself to MST being sought out and embraced by its prospective customers.

After declaring this, it is my belief that if it doesn’t now come through after years of declaring positive outcomes are not too far away, it is going to be hard for even the most ardent believers to continue to support the company going forward.

Any future here?

Several times in the past ATOM has asserted it had entered into deals that would eventually lead to expanding its customer base. The problem is, those deals have never come to fruition, as far as generating any revenue on the licensing and royalty side of the business, which is the model it works with.

If its solution really does deliver what it promises, it’s hard to believe it has yet to have one customer that pays for licensing and royalties after using it; that’s especially true with the companies it reportedly made deals with.

How can the company really have a superior product if it doesn’t fail fast and iterate to improve it quickly? How can it take this long without making any clear progress? And most important, any solution that added significant improvement to semiconductor transistors while lowering costs would be gobbled up by companies, or directly acquired.

With little happening over a couple of decades, there are some questions that must be answered before ATOM can confidently be considered to have a legitimate product that solves some significant problems in the semiconductor sector.

Conclusion

ATOM has at times traded like a meme stock with the accompanying volatile up and down price movement of the share price of the stock.

With MST is has yet to prove it has the capability of doing what the company says it can.

So, with a lot of investors believing in the future of the company, including the belief MST is going to eventually attract a number of customers that will change the future of the company dramatically, while driving up its share price.

There is a slight possibility that it could play out that way, but the longer the company goes on without making any progress, the less optimistic the market will be.

My conclusion is there is nothing to suggest MST is a viable solution that will lower costs and energy while improving the performance of transistors.

The combination of ATOM believers, current economic conditions and optimistic comments from management combine to make ATOM a trading stock for those that want to get in and out quickly based upon the historically quick moves in the company’s share price.

Other than that, I don’t see where there are any fundamentals that justify investing in the company for the long haul and waiting and hoping.

On the other hand, as mentioned earlier, it’s also not a stock that I would short either because of the potential to quickly squeeze.