For several reasons, investors should avoid Meta Materials (NASDAQ:MMAT) stock.
Although MMAT stock does appear to have a great deal of potential, its technology is too unproven and its valuation is too high to makes its shares a worthwhile holding at this point.
Additionally, Meta’s status as a meme stock also is a factor in my sell recommendation. As I’ve pointed out in previous columns, I expect most meme stocks to continue weakening in the coming weeks and months.
In the past, I’ve pointed out that, in my years following stocks, I’ve seen several widely heralded technologies fail to proliferate to any great extent.
Indeed, I believe that, for every two state-of-the-art systems that did become very popular, like pholtovoltaic solar and the cloud, there are two more, such as graphene and nanomaterials, that never did become very profitable.
Meta’s technology does sound very exciting and useful. For example, the ability of the products that the company is developing to allow 5G to be transmitted through more areas and substances is quite intriguing, assuming that the product is cheap enough to make it worthwhile. The early-stage breast cancer test and the non-invasive glucose measuring device that the company is developing have even more potential.
But Meta indicated that the medical products that it’s developing are still two to seven years away from being completed, And although Meta listed many “Co-Development Partners and Customers,” including major companies like Panasonic (OTC:PCRFY) and Sony (OTC:SNEJF), my research did not turn up any evidence that any of Meta’s products are being utilized or on the verge of being purchased.
In his August 11 article on META stock, Muslim Farooque, another InvestorPlace columnist, succinctly and aptly explained the situation. He wrote, “The company has lofty goals, but it currently has no proven products. That makes the meme stock a speculative bet.”
Given the uncertainty of new technologies, I recommend waiting for some concrete signs that at least one or two of Meta’s technologies are viable and considered worth buying by potential customers before wading into the stock.
Wait for a Better Valuation
I’d also recommend waiting for a more favorable valuation before taking a bullish position in the name. MMAT stock currently has a market capitalization of over $1 billion.
I’ve seen companies that, like Meta, have very little revenue but have much higher market capitalizations than $1 billion. Still, $1 billion is no bargain; there are some very promising companies that are earning a significant amount of revenue whose stocks have much lower market capitalizations. Ayro (NASDAQ:AYRO) and American Superconductor (NASDAQ:AMSC) come to mind.
Additionally, as I’ve pointed out in several recent columns, most meme stocks have declined in recent weeks, and I expect that trend to only intensify going forward. For example, GameStop (NYSE:GME) has tumbled about 45% since peaking on June 9, while AMC (NYSE:AMC) is also down around 50% since mid-June.
MMAT stock itself has tumbled 80% since its June peak. But I believe that the shares could sink much further. That’s because, as we get further away from the last government stimulus checks that were sent to millenials without children and get closer to the termination of the federal unemployment bonus in September, meme stock investors’ ability to influence stock prices is likely to wane further.
Also likely to pressure the meme stocks is the change in millennials’ spending habits versus a few months ago, when most of them had not yet received vaccinations. Now that most of them have been vaccinated, the majority are probably spending much less money on stocks and much more on vacations and social activities.
The Bottom Line on MMAT Stock
Investors should wait for Meta’s products to become more proven and for MMAT stock to drop much further before considering buying the shares. Those who already own the stock should sell it and find better established, cheaper names in which to invest.
On the date of publication, Larry Ramer held long positions in Ayro and American Superconductor. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.