Since its reverse merger with Torchlight Energy Resources in June, the shares of Meta Materials (NASDAQ:MMAT) have taken a big hit. MMAT stock has tumbled 18% in the last month, despite generating a lot of social media chatter.
The company has lofty goals, but it currently has no proven products. That makes the meme stock a speculative bet.
Meta Materials started trading on Nasdaq after completing its reverse merger with oil and gas producer Torchlight Energy Resources. As a result of the deal, Meta raised over $250 million, which it intends to invest in the development of cutting-edge materials technology.
Since going public, Meta has attained meme-stock status, producing a topsy-turvy run for its shares. However, the short squeeze of the company’s stock has run its course, leaving the shares highly overvalued.
About Meta Materials
Meta Materials is a Canadian photonics and smart materials company. The company specializes in the design of complex materials which can be used to manipulate light and other forms of energy.
The company has several interesting projects in its pipeline. One of them is a window film that enhances indoor 5G and digital TV reception. Moreover, it has been developing a nano-heater that can defog autonomous-vehicle sensors. Most recently, it announced the completion of a non-invasive, at-home glucose sensing device. The device allows patients to measure their glucose levels without drawing any of their blood.
The market for metamaterials is limited, but it is expected to rise to $10.7 billion by 2030. Moreover, after factoring in other sectors that can use the company’s products, such as energy, the Internet of Things, medicine, and advanced materials, the company’s opportunity grows exponentially.
However, the company is more or less a startup, and it’s far from generating any profits. Last quarter, it reported just $1 million of sales, but its market capitalization is $1 billion. Therefore shareholders should continue to expect more volatility from the shares going forward.
It’s evident that Meta Material’s technology has not advanced as much as it had hoped so far. However, it plans to work on its product pipeline and possesses more than 50 patents.
Its technology is exciting, but it needs a truckload of cash to finalize its projects. The deal with Torchlight has given Meta some funds to work on its expansion plans.
Moreover, thanks to the short squeeze, the company raised $100 million of cash by issuing new shares of its stock and plans to sell more shares in order to raise $250 million.
Despite these developments, the company’s $1 billion market capitalization is unjustified. MMAT stock is overvalued based on its fundamentals and its uncertain future.
The Bottom Line on MMAT Stock
Since going public, Meta Material’s shares have shed tanked significantly. Another short squeeze appears to be unlikely, so the stock is highly overbought at this stage. The company is working hard to get its projects up and running and to grow its top and bottom lines. However, it’s going to take a long time for the firm to transform itself into a viable business.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines