Meta Materials (NASDAQ:MMAT) develops high-performance functional materials and nanocomposites. When it joined the meme stock rally in June, the rally to an intraday high of $21.76 proved short-lived. Within days, MMAT stock plunged.

Selling pressure eased by late summer. Speculators are trying to build positive momentum in the electronics components supplier.

Meta Materials’ second-quarter results may pressure bears, who hold a nearly 11% short interest in the stock.

In Q2, the company posted GAAP earnings per share loss of CAD 0.03. Revenue nearly doubled, up 195.2% Y/Y to CAD 624,340.

The firm lost CAD 5.18 million. For the first half of the year, MMAT took a non-cash loss of CAD 40 million. It burned through CAD 5.6 million in cash.

Furthermore, capital expenditures used for buying property, plant, and equipment and intangible assets weighed on the balance sheet.

Meta ended the quarter with plenty of cash on hand. With CAD 154.634 million, it will continue the designing and development of highly functional materials.

If successful, it will count on customers in the consumer electronics, health and wellness, aerospace, automotive, clean energy, and 5G communications space.

A Closer Look at MMAT Stock

Meta’s cash burn and quarterly loss tell a different story from its potential addressable market. It did not post more than a million in quarterly revenue.

Conversely, investors could buy Boeing (NYSE:BA) stock for exposure to the aerospace industry.

Investors who want exposure to 5G, oil and gas, and clean energy could consider engineering and construction firm MasTec (NYSE:MTZ) instead. The firm posted a record backlog in the second quarter of 2021. It attributed its growth to a record backlog in communications, clean energy and infrastructure, and electrical transmission.

Before MMAT stock shined from the meme trade in June, the stock went nowhere. It spent much of the year trading in the $2 to $4 range. Short-sellers are betting that the company cannot scale its business. The more Meta’s revenue grows, the more losses it may incur.

Meta touted its breakthrough performance that could reach a wide range of markets. It looks at the highly functional materials as the breakthrough in material science.

For example, in the 5G infrastructure, the rollout needs new materials for transparent antennas and reflectors.

A Market Opportunity

Meta’s market opportunity from electric vehicles, IoT and Medical, and the rare-earth market suggests its device market addressable market is $10.7 billion by 2030.

Investors should treat the company’s claim that its stock is trading at around 5 times 2030 sales with skepticism. Until it books revenue in each of the mentioned sectors, the potential growth is speculation.

Meta identified its potential solution in each of the growing markets. In 5G, signals need the placement of many small cells. Meta could supply transparent window film that reflects the signal to cover dead zones. As carriers spend billions on infrastructure, it may consider Meta’s solution.

In the automotive space, Meta has solutions for the autonomous vehicle market. Meta nanoweb is a transparent conductive film. This gives a deicing and defogging property that does not block the camera or sensor functions.

Customers may want Meta’s nanoweb for its flexible property. This includes using the material to enable sensors on foldable phones.

Plus, Meta’s antenna works from low to high frequencies. Automotive firms will want to use Meta’s antenna for providing communication systems in automobiles.

The Bottom Line

Investors are relying on luck by buying MMAT stock at this time. With the high risks come extreme returns. Strong speculative momentum in June sent the stock to over $20. If Meta had a product on the market with many customers back then, the stock would not have fallen by so much.

The Nasdaq and Russell 2000’s weak performance in recent weeks is another risk factor for Meta shares. Fears are on the rise, so market participants may have less appetite for speculative, unproven companies.

If Meta posts another big quarterly loss, investors will lose patience waiting for the firm to demonstrate strong growth.

Despite the mentioned risks, Meta has potential. It filed 149 patents. It has 82 granted patents in the area of medical, lens casting, photonics, and nanoweb. This will give it a competitive advantage over several years.

Meta has a production scale-up roadmap. After it builds its new 68,000 square foot facility in Q4/2021, it may ramp up revenue from there. By H1/2022, Meta will pilot scale production of roll-to-roll and rolling mask lithography.

Investors with a timeframe of at least six months may consider investing in Meta Materials.

On the date of publication, Chris Lau 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.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.