Aterian CEO Tells Investors Shipping Costs Are Down 90% From Pandemic Highs During Q3 Results

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Discusses Aterian’s Q3 results and outlook with analysis

Consumer products platform provider Aterian (NASDAQ:ATER) reported third quarter earnings to investors after the close of trading on Tuesday. The stock traded -3.8% lower in after hours trading as investors initially digest the news.

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Aterian's Q3 Earnings

During the third quarter, Aterian generated sales of $66.3 million at the top end of the $62-66 million guidance range provided by management in September. The sales figure represented a -2.6% decline when compared to the prior year but came in just over 10% ahead of consensus forecasts of around ~$60 million.

Aterians operating loss during the quarter widened significantly from -$7.5 million in 2021 to -$108.9 million in 2022. The main driver of the growing losses related primarily to a non-cash loss from an impairment on goodwill ($90.9 million) and was also impacted by an impairment on intangibles ($3.1 million) and non-cash stock compensation.

The firm's adjusted EBITDA swung from $0.7 million in 2021 to a loss of -$9.1 million.

One new product was launched by the company during the quarter.

ATER’s CEO Yaniv Sarig commented on the results highlighting that “Shipping costs have cast a cloud over eCommerce for an extended period, but last week we loaded containers from China at approximately a 90% discount to the costs we incurred in the second half of 2021”

With shipping costs showing a reversal of trends Aterian plans on aggressively liquidating higher cost inventory to grow the market share of their products and help bring the company back towards sustainable margins and a positive adjusted EBITDA.

Sarig is targeting a return to positive adjusted EBITDA in the second half of 2023 prior to the financial year's end.

For the fourth quarter, Aterian expects revenue to decline to a figure between $45-55 million. The mid-point of the guidance range was marginally above the streets’ forecast of around $48 million.

Analyst Marvin Fong from BTIG Research following the result discussed how lower shipping rates should boost margins towards the mid-50s range and should drive contribution margins higher. Fong believes Aterian might see an accelerated path to profitability from accretive acquisitions and product launches. 

BTIG remains ‘buy’ rated on ATER but lowered the target price from $4.50 to $3.50 after accounting for shareholder dilution from the recent capital raise and forecasts revised lower.

On average ATER has a consensus ‘buy’ recommendation across the street and an average target price of $4.40.

Fintel’s quant platform has identified that ATER continues to remain as a short squeeze candidate.
This is determined by Fintel’s short squeeze score of 80.82, which is bullish on the prospects that an event could occur. The score ranks ATER in the top 7% of 5,116 screened stocks.

The score is based on ATER’s short interest of 14.03% of its float currently shorted, with 5.54 days to cover, according to Nasdaq data.

ATER remains the most popular investment held by retail investors with an average position size of $16.2K. Get access to retail trade data by linking your portfolio with the Fintel platform for free here.

Article by Ben Ward, Fintel