We are pleased to welcome Atomera (ATOM) to the Tailwinds Select Portfolio. ATOM is a company we have been watching for a while, but waiting to pull the trigger. Despite the fact that the stock has been strong recently, we believe the time is ripe for investors to be looking at Atomera.
ATOM is a pre-revenue (basically) company that has a technology for improving performance of microchips. The Company has been developing their technology over several years, with many major semiconductor manufacturers testing and sampling their product.
Atomera has said that having only one large customer would lead them to profitability, they have yet to bring a customer over the finish line to actually using their technology in a production line. We believe that is going to change soon, which will be THE catalyst that will take ATOM from a development stage company to a profitable, sustainable enterprise.
Our confidence in ATOM stems from their most recent earnings call on February 13. On that call, Atomera said that one client had installed equipment at their fab. This will allow the customer to accelerate testing of the process on their chips.
The key takeaways from this announcement are the following:
- The process must be working. For a client to take up space, and spend the money associated with this, they must have seen a benefit already.
- Licensing can’t be too far away. Assuming the process works, with the customer having the equipment on site, testing should be greatly accelerated, which will hopefully lead to a license soon.
- The customer is likely a very large fab. In order for them to dedicate space to testing, this manufacturer has to have decent scale. Which means that, if they sign a license, it will likely be of sufficient size to generate profits for ATOM.
- More deals are likely to follow. I have always felt that ATOM’s business was like dominoes; if one falls, there will likely be more following. Which stands to reason; if one firm sees enough benefits to engage ATOM, likely every fab will see similar benefits and sign licenses.
- I’ll also add that, unrelated to the earnings call, but bullish nonetheless, a director bought $100,000 worth of shares in the open market this week.
To be clear, there remains risk to the ATOM story. They haven’t signed a license yet and it remains to be seen what the terms will look like if/when they do. However, in our opinion, the story is being derisked in real time and ATOM is poised to sign its first licensing deal which will be a game changer for the Company.
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This story kind of reminds me of RESN back when they were working strategically alone with SWKS. Sounds like ATOM has a few more irons in the fire, so I’ll give it a look and do some more DD.
Very good analogy. Only one iron needed to make this a success. Feels like it’s getting close. I’ve done a lot of work on the technology and believe it works. Timing of adoption, or just adoption in general, is the question. If you know any fab guys, would be a good DD call.
Little question: Atomera in currently working with over 15 different chip producer but….if the their technology is so promising why noone is buying now the whole company in order to take a competitive advantage? Maybe we are overestimating the probability of success?
I shared your concern until they announced that a customer had installed their equipment to accelerate testing. Who would take up space on a fab floor and stop processes for testing unless they had a very high likelihood of success? No one, in my opinion. Therefore, I think last Q’s call was the tipping point and we’ll see a license in the next 6 months. If one domino falls, more will follow. It’s still risky, but the upside is tremendous if they are successful.