Meta Materials (NASDAQ:MMAT) stock caught my attention when it became popular as a meme play.
Meta Materials is a company that is just starting up, which is clear from its most recent financial statements.
In Q2 2021 revenue grew by 197% making for a very impressive headline. However, in absolute terms, the company’s revenues are minuscule at $624,320 for Q2 and $1.2 million for the first half in total.
These revenues are dwarfed by the Meta Materials’ losses of $5.2 million in Q2 and $49.3 million total in the first half of 2021.
The company is in a good position with regard to reserves and liquidity. At the end of Q2 2021, Meta Materials had cash of $154.6 million.
Cash burn for the first half of 2021 was $5.6 million which was slightly less than the cash burn of $4.5 million at the same time last year. The company also has no debt, meaning that there isn’t any overhang on its balance sheet.
Meta Materials’ future success is wholly dependent on the execution of its promise. Therefore MMAT stock must be treated like early-stage biotech or pre-revenue venture capital investment.
A Closer Look at MMAT Stock
As these types of investments, examining Meta Materials intellectual property portfolio and the pipeline is important.
I am pleased to say that in my view the company has a solid portfolio that could support MMAT’s $1.3 billion market cap.
At the end of Q2, Meta Materials currently has 82 patents granted and 67 patent applications. Last quarter alone the company was successfully granted 6 new patents. The breakdown of the companies patents are;
- 10 patents in Lens Casting
- 10 patents in Photonics
- 9 patents related to Medical Equipment
- 17 patents in rolling mask lithography and transparent conductors
These patents have multiple applications in billion-dollar industries like 5G, Solar and Medical Technology. Therefore the successful licensing or commercialization of even one of these patents could send MMAT stock skyrocketing.
Short Interest
I can’t write an article on MMAT stock without discussing its short interest. Unfortunately, this type of talk has overshadowed the news of the interesting things the company is developing.
MMAT has very minimal analyst coverage but a lot of short interest. This is telling of the type of strategies employed by Wall Street.
According to a CNBC interview last month with S3 Partners’ Ihor Dusaniwsky he mentioned MMAT as a short candidate.
Looking at MMAT stock’s short interest it is an even better candidate now as when it was first mentioned. At the beginning of September short interest was 22.1 million shares with an average daily volume of 21 million shares. This translates to a Days to Cover ratio of approximately 1.05.
However, based on the latest available data, MMAT has a short interest of 25 million shares and an average daily volume of 19 million shares. Therefore the latest Days to Cover ratio is 1.31 roughly 30% higher than it was last month increasing the likelihood of a short squeeze.
Investor Takeaway
To be clear, I think MMAT is an interesting investment even without the short squeeze. Meta Materials’ products could be the building blocks of tomorrow’s technology.
However, I also know that the company is playing the long game and it could take years before any of its products fully take off. This is why the short-squeeze situation benefits investors as it provides a short-term catalyst while waiting for the company to execute.
If the short-squeeze doesn’t pan out, you will still be left with a company that could easily 5x based on its own merits. This in my opinion makes MMAT stock a compelling risk to reward opportunity.
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On the date of publication, Joseph Nograles 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.
Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.
