One of the most beaten-up names in the market today, I don’t feel particularly inclined to pile on top of Matterport (NASDAQ:MTTR) stock.
However, the reality of the news cycle is that MTTR stock is generating headlines, albeit for the wrong reasons.
Posting a staggering loss of around 64% on a year-to-date basis, circumstances don’t look too hot for the 3D spatial imaging specialist.
Then again, such a severe hemorrhaging could bring out the contrarians. It’s possible that once the fallout subsides, MTTR stock could be due for a recovery.
Thanks to a combination of technical factors and the law of small numbers, even a dead-cat bounce could yield big results for risk-tolerant traders. Therefore, Matterport isn’t completely out of the game.
Further, InvestorPlace contributor Mark Hake — who has extensively discussed the challenges Matterport faces — mentioned that the company “still has $139 million in cash on its balance sheet, so it can afford to burn cash for another two years or so before needing to raise more.”
If you’re truly optimistic, MTTR stock could stick around and exhaust the bears, possibly then sparking a reactionary upside move.
It’s an incredibly far-fetched idea but far-fetched is about the only sentiment that Matterport can bank on these days.
Numbers and MTTR Stock
While the balance sheet may be a conspicuous positive for MTTR stock in a sea of negatives, Hake acknowledges that contrarians considering this dangerous route are in for obstacles on top of obstacles.
As he mentioned, “Matterport is still not cash flow positive. In 2021, its cash flow from operations was negative $38.8 million. And after deducting $810,000 in capex and $7.2 million in capitalized software costs, its burn rate was $46 million for the year.”
Another factor to consider is that the business is stretching remaining investors’ patience. The company’s fourth-quarter earnings report didn’t meet analysts’ expectations.
No matter how you parse the numbers, they’re just not working out for MTTR stock. So, the underlying business itself needs to garner new relevance, which is both the hope and the pitfall of the company.
Before the malaise, one of the reasons why investors latched onto MTTR stock was Matterport’s ability to facilitate success in the new normal. People needed mechanisms to buy real estate while limiting physical contact with strangers during the pandemic. Obviously, a spatial data and imaging service provided a readymade solution.
After two years of lockdowns and mitigation protocols, the American people are simply tired of the crisis. Honestly, I believe that even if a new variant of the SARS-CoV-2 virus appeared — something that’s deadlier and more infectious — consumers will be reluctant to submit to preventative measures.
Just by that alone, consumers may not find much use for spatial imaging, especially if they’re going to examine the properties in question physically. It also remains to be seen if the housing boom can sustain itself.
Now, I understand that the common perception is that housing prices will move higher since the conditions that caused the last housing crisis are fundamentally different from what we see today. However, the loss of purchasing power for the dollar presents the biggest hurdle for real-estate-dependent companies.
A key issue with soaring inflation is that it’s a pernicious tax on workers. You see, just because the money supply increases does not mean that your wages increase on an identical ratio. If that were the case, inflationary monetary policies would be utterly pointless.
No, someone has to hold the bag, which is the American people. Once too many people hold too many bags, the floor underneath will give away, leading to a recession, perhaps depression.
Monitor the Proceedings Closely
With the stability of the economy and the housing market questionable at this hour, I’m not ready to dive into MTTR stock. When you consider that Matterport also has many challenges specific to its business, I’m even less ready to participate.
Of course, you’re free to do what you want. For me, I believe waiting out the circumstances seems a wiser choice.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.