Aterian Is Intriguing, But Facing Tough Issues With ATER Stock

To many, Aterian (NASDAQ:ATER) is an intriguing company. But given the multiple macro headwinds that the company is facing, now is not the right time to buy ATER stock.

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Aterian’s main business is using artificial intelligence and other technologies to create and sell products. The company markets its own products, and acquires offerings from other firms. To add to this, it also has built a supply chain.

Additionally, on Oct. 1, Aterian launched DealMojo, which Yaniv Sarig, co-founder and chief executive officer of Aterian, explained, “connects publishers, content creators and influencers (“Affiliates”) with leading Amazon sellers who offer bonus commissions to the Affiliates….Through DealMojo, sellers on Amazon can connect directly with publishers, influencers and other affiliate marketers to promote their Amazon listings and drive more sales to their Amazon storefront.”

Why Aterian’s Core Businesses Are Intriguing

The company’s software is AIMEE, which stands for Artificial Intelligence Marketplace E-commerce Engine. AIMEE uses AI and data derived from consumers to create, price, and sell products. Aterian has created over “2,000 products” in “categories from home appliances and kitchenware to essential oils.” Given the amazing capacity of AI to analyze huge amounts of data, Aterian’s innovative product creation process could result in revolutionary offerings.

I have not heard of any other company seeking to connect content creators with Amazon (NASDAQ:AMZN) sellers, nor was I able to find evidence of any such initiative in my research. Many sellers on Amazon are looking for ways to attract more buyers to their product pages and seeking any edge over their competitor. (That’s why Amazon’s ad business is growing so rapidly and raking in so much revenue).

Also, I believe that Aterian may eventually be able to recruit many customers for the service, making it quite lucrative and driving ATER stock higher.

ATER Stock Macro Issues

During the company’s second-quarter earnings conference call on Aug. 9, Aterian CEO Sarig said that the firm was in the midst of “a full crisis” and was coping with the “astronomical cost of shipping.”

Additionally, Sarig reported that Aterian was meaningfully hurt by the economic reopening in Q2. This caused consumers to spend more time in brick-and-mortar stores and less time and money on e-commerce.

Moreover, Sarig stated that the company was taking steps to improve its supply chain and that he was convinced that both the supply chain issue and the change in consumers’ habits would prove to be “transitory.” Still, no one with any degree of certainty, can predict how long these issues will continue to negatively impact Aterian’s financial results and weigh on ATER stock.

And the issues do indeed appear to be negatively impacting both the company’s results and its shares. Excluding the company’s mergers and acquisitions, its revenue tumbled to $34.6 million in Q2 from $53.8 million during the same quarter a year earlier, its CFO, Arturo Rodriguez, reported on the earnings call.

Meanwhile, between Sept. 13’s close and Oct. 22, ATER stock lost nearly 60% of its value. The plunge suggests that Aterian has become much weaker due to the federal government eliminating the stimulus at the beginning of September.

And going forward, with the weakening of the meme-stock phenomenon, ATER stock may very well continue to underperform.

The Bottom Line on ATER Stock

With Aterian facing negative macro catalysts, investors should wait until those issues start to recede and  until the price drops further before taking a bullish position in the shares.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry Ramer has conducted research and written articles on U.S. stocks for 14 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. 

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