Aterian, Inc. (ATER - Get Rating) in New York City is a leading technology-enabled consumer products platform that creates, acquires, and collaborates with best-in-class e-commerce businesses to generate top-selling consumer products by leveraging proprietary software and an agile supply chain.

The stock has gained 93.8% in price over the past month after ATER announced that it had been recognized in the third annual Financial Times ranking of The Americas’ Fastest Growing Companies.

However, the company’s shares are down 85% in price over the past year and 39.7% over the past six months to close yesterday’s trading session at $4.67. In addition, the stock is currently trading 84.8% below its 52-week high of $30.64. Last month ATER reported the completion of a private placement to fund its business operation. The move exhibits the company’s poor cash flow generating capabilities, making its near-term prospects look bleak.

Here is what could shape ATER’s performance in the near term:

Additional Financing

Last month, ATER announced the completion of a private placement of 6,436,322 shares of common stock, 3,013,850 pre-funded rights to acquire common stock, and related warrants to purchase up to 7,087,630 shares of its common stock. The company intends to use the net proceeds from the private placement for working capital, business operations, and other general corporate objectives, including acquisitions, investments in or licensing of complementary products, technologies, or enterprises, operating costs, and capital expenditures.

Inadequate Financials

ATER’s net revenue increased 52.6% year-over-year to $63.32 million for the fourth quarter, ended Dec. 31, 2021. Its operating loss was $1.97 million. The company reported a  $5.31 million net loss, while its loss per share amounted to $0.11 over this period. In addition, its net cash used in operating activities came in at $41.97 million for the year ended Dec. 31, 2021.

Poor Profitability

ATER’s 0.01% trailing-12-months CAPEX/Sales multiple  is 99.5% lower than the 2.6% industry average. Also, its trailing-12-months ROA, net income margin and ROC are negative  75.3%, 95.3%, and 17.9%, respectively. In addition, its cash from operations stood at negative $41.97 million compared to the $159.91 million industry average.

POWR Ratings Reflect Uncertainty

ATER has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ATER has an F grade for Stability and a D for Quality. The stock’s 2.70  beta is consistent with the Stability grade. In addition, the company’s poor profitability is in sync with the Quality grade.

Among the 48 stocks in the C-rated Technology – Electronics industry, ATER is ranked #41.

Beyond what I have stated above, one  can view ATER ratings for Value, Momentum, Growth, and Sentiment here.

Bottom Line

Despite ATER’s efforts to capitalize on the booming e-commerce market, the company has been embroiled in several controversies impacting its operational growth. In addition, analysts estimate its EPS will remain negative in the current year and next year. Therefore, we believe the stock is best avoided now.

How Does Aterian Inc. (ATER) Stack Up Against its Peers?

While ATER has an overall D rating, one might want to consider its industry peers, Arrow Electronics Inc. (ARW - Get Rating) and Wayside Technology Group Inc. (WSTG - Get Rating), which have an overall A (Strong Buy) rating.

ATER shares fell $4.67 (-100.00%) in premarket trading Monday. Year-to-date, ATER has gained 2.68%, versus a -6.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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