Atomera Incorporated (ATOM - Get Rating), which is known for its patented Mears Silicon Technology (MST), develops, commercializes and licenses processes and technologies for the semiconductor industry. Its shares have soared nearly 53% year-to-date and 48.4% over the past month. The stock hit its $47.13 all-time high on February 8. It  announced in January that it had entered a Joint Development Agreement (JDA) with a leading semiconductor provider.

However, ATOM’s shares have retreated 4.5% over the past three months to close yesterday’s trading session at $24.61.  And company management warned during a conference call on April 28 that its financial results will remain inconsistent until the company can start generating royalty revenues.

The stock is currently trading 47.8% below its all-time high and is  expected to decline further in the near-term.

Click here to checkout our Semiconductor Industry Report for 2021

Here are the factors that we think could shape ATOM’s performance in the coming months:

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ATOM is known for its MST, a patented, quantum engineered material that  enhances transistors allowing them to deliver better performance in electronics. Its revenue increased 545.2% year-over-year to $400,000 for the first quarter, ended March 31, 2021. However, this performance can be attributed primarily to its advancement of its  JDA customer to the fourth phase of its customer engagement process, indicating that it has delivered its MST IP transfer package in accordance with the  contract.

The company’s net loss in the first quarter came in at $3.62 million versus  $3.65 million in the prior-year quarter. ATOM’s loss per share for the quarter was $0.16 compared to $0.22 in the year-ago period. However, company management  said in a conference call on April 28 that ATOM  does not have sufficient visibility to forecast the timing or likelihood of achieving certain milestones and that its revenue is expected to be zero for the current quarter, ending June 30, 2021.

Completed ATM Offering

On January 5, 2021, ATOM completed  a common stock offering pursuant to an at-the-market (ATM) equity program and generated $24.2 million in net proceeds. However, the offering  is expected to cause  share dilution.

Expensive Valuation

In terms of forward EV/S, ATOM’s 1,389.29x is significantly higher than the 4.17x industry average. Its forward P/S and P/B of 1,478.43x and 19.30x, respectively, are also higher than the 4.06x and 6.19x industry averages.

Consensus Price Target Indicates Downside

ATOM is currently trading at $24.61, and Wall Street analysts expect the stock to hit $14 in the near term, which indicates a potential 43.1% decline.

POWR Ratings Reflect Bleak Prospects

ATOM has an overall F rating, which equates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. ATOM has a D grade for Quality, which is in sync with its negative values for trailing-12-month ROCE and ROTA versus  to the 6.77% and 3.19% respective industry averages.

The stock has an F grade for Value, which is consistent with its significantly higher-than-industry valuation ratios. ATOM has an F grade for Stability also. This is justified given its 1.51 beta.

ATOM is ranked #95 of 98 stocks in the B-rated Semiconductor & Wireless Chip industry. Click here to see ATOM’s ratings for Sentiment, Growth, and Momentum as well.

Better than ATOM: Click here to access 35 top-rated stocks in the same industry.

Bottom Line

Even though ATOM’s top line increased 545.2% in the first quarter as it advanced its JDA customer to the fourth phase of its customer engagement process, its revenue is expected to be zero in the current quarter (ending June 30, 2021) as per the company’s guidance. Given this backdrop, the stock seems to be extremely overvalued. Analysts also expect ATOM’s EPS to remain negative in the coming quarters. So, we think it’s best to avoid the stock now.

Click here to checkout our Semiconductor Industry Report for 2021

ATOM shares were unchanged in premarket trading Wednesday. Year-to-date, ATOM has gained 52.95%, versus a 14.01% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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