Aterian Posts Strong Q3 Revenues; Shares Gain 23.6%

Shares of Aterian, Inc. (ATER) jumped 23.6% in the extended trading session on Monday after the technology-enabled consumer products platform posted results for the third quarter of 2021.

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Net revenue of $68.1 million rose 16% year-over-year but missed analysts’ expectations of $78.29 million. Quarterly Direct Revenue (excluding Wholesale and PPE) grew 37% year-over-year.

Aterian has reported a net loss of $3.13 per share against the loss of $0.05 per share in the same quarter last year. Contribution margin declined to 12.1% from 19.1% in the prior-year quarter on the back of increased costs due to supply chain disruptions.

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The company recorded a gross margin of 50.2%, up 240 basis points year-over-year. Adjusted EBITDA came in at $0.7 million, lower than $5.1 million in the prior-year quarter.

Notably, the company did not launch any new products in the third quarter. It had launched eight products in the year-ago quarter.

CEO Comments

The CEO of Aterian, Yaniv Sarig, said, “This quarter was an all-hands effort to stabilize our business, strengthen our balance sheet and prepare Aterian to pursue our growth trajectory as we approach 2022…Our logistics team has successfully secured new competitive shipping rates with various partners including Amazon, Flexport and XPO, who have proven to be great partners through these disruptions.”

“Although the risks related to the COVID-19 pandemic and its impact on global supply chains have not subsided, we believe that the work we have done is setting us up to accelerate growth again in 2022 organically and through an expected resumption of our M&A strategy,” Sarig added. (See Aterian stock charts on TipRanks)

Analysts Recommendation

Following the third-quarter results, BTIG analyst Marvin Fong maintained a Buy rating on the stock and increased the price target to $12 (92.62% upside potential) from $10.

Fong commented, “ATER trades at such depressed multiples (1x sales, 2x FY22E gross profit) that even modest improvements in the outlook can drive meaningful changes in PT. While we are more optimistic on the core business, we are a bit more cautious on the M&A side of the business as we think the next several quarters could see a lot of good prospects picked off by peers flush with capital. On the whole, we still come out net positive and lift our target FY22 EV/Sales multiple to 2.0x from 1.8x.”

Consensus among analysts is a Strong Buy based on 3 Buys and 1 Hold. The average Aterian price target of $13 implies 108.67% upside potential to current levels.

Risk Analysis

According to the new TipRanks’ Risk Factors tool, the Aterian stock is at risk mainly from three factors: Finance and Corporate, Tech and Innovation, and Legal and Regulatory, which contribute 37%, 19% and 15%, respectively, to the total 73 risks identified for the stock.