Atomera(ATOM): Epic short squeeze possible with multiple catalysts on the horizon!

August 30, 2020Atomera, low float, low float runner, patents, semiconductors, short squeezeAtomera, IP, patents, semiconductors, short squeeze

Summary: Its not often when stars align so well on a stock that multiple indicators I look for are signaling a potential huge breakout. Not a 20-30% move but a 2-5x move that takes a company with a 200m market cap and instantly it becomes a billion plus market cap. Three key indicators I look for are: catalysts, chart and short interest. Below I will detail why each of these signal a potential very large move could happen. The bottom line is after over 200 patents being issued, over 200 peer reviewed articles being published and a whose who of people in the semiconductor space tied to the company there is little doubt the technology works and its just a matter of time before the first adopter in my opinion.

Catalysts

The major catalyst that has been imminent since the May 2020 Q1 conference call and reiterated at the Q2 CC is the signing of their first Joint Development Agreement(JDA). As seen in the Atomera chart below moving just one of the current 17 Phase 3 agreements to Phase 4, through a JDA, will lead to very high margin royalties. At the Q2 CC it was mentioned that with the JDA licensing once signed it will be easy to spread it to additional nodes within the same company which will multiple revenue opportunities by each node. Also the number I heard from multiple sources for potential revenue per node is $25-50m/node. The chance for just 2 JDAs signed and each with multiple nodes seems likely. Here are my estimates using 2 JDAs with 2 nodes each at $25m/node. Roughly $100m in royalties minus the $20m/year in costs and $80m/year in profits. Since they have plenty of cash and no reason to raise money I am using 20m shares as the share count. With $80m in potential royalties divided by the 20m shares that would be $4/share in earnings and with a typical industry PE of 25 a $100 price target. Since the market is forward looking a short term target of $25-50 seems appropriate. There are a lot of potential combinations of number of nodes and royalties/node and I used what I consider a middle of the road potential outcome.

10 Customers with 17 engagements one step away

Chart

The chart below shows several interesting properties. The first is the support of the 50 dma just like we saw back in July. One of the other significant findings in the chart is the volume relative to the float. My estimates of the float are well under 2m shares and the 10 day average volume is 872k and the 50 day average volume is well over 500k/day. Using the average volume of 500k/day times 50 days the float has been turned over 10 times in the last 50 days. Also with the stock above the 50 dma it means the float has been turned over in this area which will make the float much tighter. Each time a float is turned over more and more shares get taken out of it plus the shareholders have higher and higher cost averages meaning they have no incentive to sell in this area. The increasing volume, float turns and increasing moving averages are all signals that the stock when it moves could be in for a step function move. Note CMF has remained positive during the basing process which is much more bullish than the last basing period in July.

Short Interest

The short interest in the stock may be the biggest catalyst of all. The recent short interest number on 8/14 saw the short interest increasing 52% from the prior two week reporting period. It jumped from 1.1m to 1.69m. Since that time the stock has been shorted heavily but with very little impact on the price. During the period from 7/31 to 8/14 where the short interest climbed by 500k shares the stock actually went up 10%. This continued strength led to a paid for short article that was written to try and allow shorts to try and cover their shares. Even with the doubling of average volume the stock showed strong resilence and was actually up at one point during the day. Even with the short attack the stock closed the week well above the 50 dma and not far off the previous weeks close.

Large Institutions were huge buyers in Q2

What does this all mean for the stock? First the most obvious conclusion should be made by looking at the volume. It has ballooned from 75k shares/day in April to over 900k shares/day through August and has continued to ramp upward along with the share price. Where the dollar trading volume was under $500k/day its now over $10m/day. This in itself should have been a red flag for shorts as that type of volume has zero to do with retail and all to do with institutional players. Just like in the last institutional filings where new holdings increased 200% and institutional share holdings increased 73% that trend seems to have further accelerated. Given the extremely low float that is continued to be bought up on a daily basis its seems like all that is left is for us retail players to swim along with the whales who are literally steering the ship.

Theory on future of Atomera

I have discussed what the stock looks like in the future with many people over the last few months. My original thoughts were they would continue to expand licenses to all the other phase 3 customers over time. People who have been following Atomera for much longer than myself have said the company will come into play for acquisition after they get the first deal signed. I have said that makes no sense they would sell to a large fab after the first license. In fact no large fab is going to want another large fab to own the technology. So up until now I have discounted the possibility of a buy out. After continued discussion I realized now that it is possible except it won’t be a large fab that buys them it will be a speciality IP licensing company that could take them private. This makes sense after a deal has been signed because they will have all the details needed to getting future deals signed. The structure of deal, royalties and support will all be structured like the first deal. The other large fabs would rather sign with a speciality IP licensing company since this is what they do. The real question is at what price do they attempt to acquire prior to additional licenses getting signed?

Atomera Institutional Ownership and float estimate https://joesstockreports.wordpress.com/2020/08/15/atomeraatom-institutions47-and-insiders15-6-ownership-after-q22020/

Atomera Q2 CC https://joesstockreports.wordpress.com/2020/08/07/atomeraatom-q2-cc-information/

Atomera JDA Valuation Estimate https://joesstockreports.wordpress.com/2020/07/22/atomera-post-deal-valuation-estimate-per-deal/

Atomera Patent Information https://joesstockreports.wordpress.com/2020/06/06/atomera-patents/

Atomera General Information https://joesstockreports.wordpress.com/2020/05/26/atomeraatom-information/

https://joesstockreports.wordpress.com/2020/08/30/atomeraatom-epic-short-squeeze-possible-with-multiple-catalysts-on-the-horizon/