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Aterian Jumped More Than +12% on Thursday’s Guidance/M&A Update Before Erasing Gains – 24/7 Wall St.

Investing

September 30, 2022 3:45 am

Last Updated: September 30, 2022 12:59 pm

On Thursday morning pre-market open, technology enabled consumer products company and Meme stock Aterian (US:ATER) provided an update to shareholders where they announced third quarter guidance and the resumption of their M&A strategy.

ATER’s stock price reached an intra-day gain of over +12% with a daily high of $2.155 by around 1pm before traders took profits and drove the price back down to close at $1.97. The stock rose +3.55% again in after hours trading with the stock crossing at $2.04 per share.

For the third quarter, Aterian expects to generate net revenue between $62 to $66 million. The $64 million mid-point of the guidance is 20% ahead of the ~$53 million consensus forecast by the street and 9.8% ahead of the $58.3 million generated in the second quarter. The company expects to report another negative adjusted EBITDA at the upcoming result.

Management reiterated that during this quarter, they are focused on selling excess inventory while maintaining product rankings at the expense of the group’s adjusted EBITDA loss with the view to strengthen the product portfolio at a lower cost basis due to declining shipping prices.

Founder Sarig also announced that ATER is expecting to take a non-cash goodwill impairment charge of between $24 to $29 million as a result of an interim triggering event caused by the high volatility and fall in market capitalisation.

ATER is scheduled to release third quarter results to the market around the 8th of November.

In addition to the financial guidance, management announced that it would be resuming its Merger & Acquisition strategy that was paused due to the Covid-19 pandemic.

The firm intends to secure assets of a brand in the health and wellness category that will be accretive to earnings and will help expand and secure market share in an existing portfolio brands category.

It was noted that no additional headcount will be added to the staff numbers following the potential transaction.

The specific terms of the potential acquisition will not be disclosed to investors, however the terms will become clear in due course.

ATER’s Co-Founder and CEO Yaniv Sarig commented stating  “We are excited at the prospect of resuming our acquisition strategy and see many opportunities in the e-commerce space. This transaction will allow us to gain market share in one of our existing product categories.” 

Marvin Fong from financial services firm BTIG stated that ATER should enter FY23 with a cleaner inventory position that will have a higher margin profile. Fong noted that while the potential M&A transaction is small, it was a positive sign that the company is resuming its strategy for acquisitions. The firm remains upbeat with a ‘buy’ call and $4.50 target price.

Brian Kinstlinger from Alliance Global Partners is bullish on the resumption of the M&A strategy with a ‘buy’ call and $5 target. Kinstlinger noted that if the removal of old inventory increases confidence that ATER’s return to profitability in 2023 is possible.

Aterian is the most held security by retail investors who have linked their portfolio for free with the Fintel platform.

This article originally appeared on Fintel



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