ATER Stock Setting up for Another Run? 5 Things to Know
Traders on social media are hyping up ATER stock as a short squeeze play after running up over 50% in the past week. In short, some indicators look to be setting up for another run.
Investors are paying attention to Alterian (Nasdaq: ATER) again after share prices bounced off lows above $2 a share. In fact, Alterian is the No. 1 trending stock on Reddit’s r/Shortsqueeze forum, a popular site for traders to post short ideas.
However, share prices are still down over 90% from last year’s highs. Will Alterian stock squeeze the shorts again? With retail sentiment building, it has the chance to. I will explain the great rise and fall of ATER stock and what you can expect this time.
No. 5 Q4 & Full Year 2021 Earnings
On March 8, Aterian released its Q4 and full-year results for 2021. The earnings report shows improvements are being made, but the company is still losing money. Despite beating top-line results, the company missed bottom-line expectations.
- EPS: (0.11) compared to (2.12) in Q4 2020.
- Revenue: $63M compared to $41M in Q4 2020.
Though revenue rose 53% YOY, the cost of goods sold (COGS) also rose 54%. So, even though Aterian is making more money, it’s not converting to earnings.
At the same time, the company is paying debt down to put it in a better position in the future. In 2021, Aterian paid down over half of its total debt (86.5M in Q4 2020 vs. 40.4M in Q4 2021).
Will it be enough to keep investors for another rally?
No. 4 Growing Interest
ATER stock is still trending upward, hitting its highest price since December. With bullish sentiment building, retail investors continue piling in. With this in mind, relative volume is up significantly over the past week.
Compared to Aterian’s average volume of 8.5M, the past week is seeing heavy interest.
- 4/4 – 144M
- 4/5 – 78M
- 4/6 – 16M
- 4/7 – 19M
- 4/8 – 86M
- 4/11 – 19M
- 4/12 – 38M
An average day before the volume spike saw 2M-6M shares exchange hands. On top of this, the 20D SMA is closing in on the 50D SMA, which can hint a trend is changing. Though we will need more confirmation, the trend change is a good sign for investors.
Keep reading to find out what to expect from the ATER stock rally…
No. 3 What Makes Alterian Unique
Founded in 2014 as the Mohawk Group, the company changed its name to Aterian in April 2021. The company now does business in over 12 countries with more than 220 workers.
Aterian’s advanced platform is a leading consumer products solution, partnering with eCommerce brands to help discover and sell top-selling goods. The company uses a cloud-based, artificial intelligence Marketplace Ecommerce Engine (AIMEE) to scale and grow products.
So far, the company partners with online shopping leaders such as…
To clarify, Aterian’s software helps discover trending items and creates opportunities for brands to capitalize on them. Moreover, the company has over 2,000 SKUs spanning 14 brands that sell in popular categories like health & wellness, beauty and electronics.
The company describes its business as similar to a sharpening tool, helping to refine the tech around us and enable better use.
No. 2 Why ATER Stock Is a Short Squeeze Target
At its current price, ATER stock lost close to 80% of its ATH value (1.4B market cap vs. 281M now). Yet short interest remains relatively high. Do short-sellers expect the price to fall further?
Retail traders on social media think not. Aterian’s short volume ratio (SVR) peaked on March 31 at over 66. Since then, ATER share prices are up 77% as short-sellers look to cover their position. But, SVR is still over 50, indicating short interest is still relatively high. After other meme stocks like GameStop (NYSE: GME) spiked in March, online traders are looking for the next big rally. And Aterian fits the model.
Investors on social media point out the rising short interest, utilization rate (availability of short shares), and skyrocketing cost to borrow. If a catalyst were to ignite share prices, the high amount of short-sellers could provide fuel for a massive rally. We have seen this happen several times now, with historical runs from GameStop and AMC Entertainment (NYSE: AMC) in 2021.
No. 1 ATER Stock Gains 180% To Start 2021 but Gives Back Even More
“It seems clear to us that this report is an attempt by a short seller to negatively impact and manipulate Aterian’s share price solely for its own benefit.”
Yet the response did little to slow the crashing share price. Since the report dropped on May 4, 2021, ATER’s stock price is down 89%, settling above $4.3. With this in mind, ATER stock is trending again, with share prices bouncing off their lows.
On top of this, traders point to Aterian’s near 35% short interest as fuel for the rally. With earnings improvements throughout 2021, ATER stock is much fairer valued than in the previous rally.
To be fair, most growth stocks took massive hits during this stretch. But after falling over 90% and still having such high short interest, will the rally be different this time?
Bonus: Will the ATER Stock Rally Continue?
Now to the part everyone wants to know, will ATER stock continue rallying. For one thing, it has all the ingredients to spark a rally. Between high short interest, growing retail sentiment, and a better financial outlook, Aterian is ready to run.
After losing over 90% of its value, I wouldn’t be shorting ATER at these levels. But tech stocks are weak in the market, with the Technology Select Sector SPDR Fund (NYSE: XLK) down 15% YTD. Will Aterian stock break the trend?
In the short term, ATER stock looks ready for a technical breakout. However, until the company proves it can earn a profit, Aterian will have no legs to stand on.
The company will need to build a solid foundation (profitable, strong balance sheet, free cash flow, etc.) for investors to stick around. If the company can pull this off, the sky is the limit for ATER stock.
About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.