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Altair Needs an Altoid

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March 09, 2007 – Comments (6)

Original Article is here.

 

Another year, another pile of increasing losses for Altair Nanotechnologies (Nasdaq: ALTI). Revenues at this $200 million company increased 54%, and the company touts that. But let's get real, they're still a paltry $4.3 million.

 

That means Altair trades at a mind-boggling 47 times revenues. Worse yet, it's still torching money, and at an increasing rate. The net loss was 73% larger than last year's, meaning the company lost more than $17 million for the year. There's no cash flow statement out yet, but given that depreciation and amortization only came to $1.5 million, you can bet the cash burn was nearly as bad as the GAAP loss.

 

This is an old story, and I've written about the years of broken nano-fairy tales in the past. To me, Altair remains the same underperforming basic-materials company it's been for years. Nothing seems to have changed, except that the newer version of the story includes copious touting of a so-called NanoSafe battery pack being used in an electric SUV, predicted to bring 2007 sales to a range between $16 million and $42 million, according to management. I wouldn't buy that, if I were you. As I've explained in the past, Altair has something of a history of presenting us with fuzzy math.

 

Not that a record of failed predictions has done much to slow the stock recently. The hype over this electric SUV recently landed Altair in Gene Marcial's "Inside Wall Street" in BusinessWeek, where the micro-write-up quoted a couple of analysts who believe Altair's higher-end story on revenues for next year, one of them even predicting a 2007 profit of $0.08 a share.

 

I've got little respect for Marcial's puddle-deep tipsheet, but in this case, I think he's done a greater disservice to investors than usual. Maybe Marcial should put down the phone and pick up an SEC filing or two. If he did, he might notice that Altair's gross margins on product sales are still negative. Or that operating expenses (less COGS) ran to $21 million. Why would anyone looking at that data believe that Altair could turn a profit by moving more of its unprofitable product? Why not ask the touting analysts (one of whom works for a firm that's done investment banking for Altair) to explain it?

 

Finally, Marcial might have thought a bit harder about the commodity nature of the battery biz, and asked himself if Altair's really got a competitive edge. But I suspect Marcial doesn't know enough about Altair to ask such informed questions. Fortunately, there are those of us who do.

 

Altair's been pushing the nano-battery story for years now, and it has thus far produced nothing but massive losses for investors. Retained "earnings" over the life of this company add up to a loss of $75.6 million. That's a big negative, folks. Oh, and it's also given investors plenty of share dilution, as Altair has had to resort to stock sales in order to gather enough money to feed the cash furnace.

 

If expensive, money-losing penny stocks are what's hot "Inside Wall Street," make sure you stand outside.

 

At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.

6 Comments – Post Your Own

#1) On March 09, 2007 at 2:06 PM, AndyHeil (< 20) wrote:

I agree with everything Jayson has said concerning Altair's financials, however the company has produced anything BUT massive losses for long term investors. Since it's low in April of 2003, ALTI has returned over 800% to brave and patient investors and since the beginning of the year, ALTI is up a not too shabby 62%. Aren't these returns commensurate with "foolish" results? To be fair, timing is everything with this stock and for investors who bought at the top of powerful moves, returns have been muted. But the Fool enjoys waxing about the benefits of long term investing anyway and for those holding since 2003, ALTI has proved to be a volatile, yet lucrative investment.

One is certaintly justified in questioning a 200 million market cap for a company that generates 4.3 million dollars a year and frankly the company fundamentals and the stock price just don't add up. But investors are concerned with a company's stock price and the stock price alone for it is in the rise and fall of the stock price which eitther makes or loses money. Yes, in an efficient market system the stock price should reflect the fundamentals of the company. So then why is ALTI's stock price so out of whack with its underlying fundamentals? There are two answers to this question. Either the market is in one of its inefficient overpricing modes and at some point the stock price will decline to reflect the company's current financials, or, if you are a believer that the market is a forward looking indicator, then the recent run up in ALTI's price may be validating the company's technology at hand.

Which side do you fall on? As Jayson continues to play the skeptic, ALTI has continued to rise over the long term. The charts validate this long term up trend channel. If we can trust what the market is telling us, then there should be more upside for ALTI investors.

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#2) On March 09, 2007 at 2:40 PM, TMFBent (99.82) wrote:

There's some flawed reasoning here, as well as flawed data. Let's start with the data. 

Rise over the long term?

Here's the long-term rise.

And look more closely. Alti's "returns" often correspond to fluffed hype. Such as you see around February, 2005. This is, IIRC, the release about batteries, that shot the stock price up, led to a quick private placement, and was subsequently the subject of an (as-yet-unresolved) SEC inquiry.

Altair's long-term devotion to over-hyping its hopes is well documented. What's never happened is anything close to profits.

 

 

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#3) On March 09, 2007 at 3:45 PM, cheekitlim (< 20) wrote:

Posting 2 articles bashing ALTI...don't it looks obvious you've an agenda? I'm just worried about your short positions today. Look at what you guys have been missing!!

Revised estimate:
Year No. of Nanosafe pack Estmated Contract Value
2007 500 US$16 million (35KWH)
2008 5000 US$320 million! (70KWH)
2009 20000 US$1.48 billion!! (70KWH)
2010 50000 US$3.2 billion!!! (70KWH)
2011 100000 US$6.4 billion!!!! (70KWH)

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#4) On March 09, 2007 at 7:23 PM, TMFBent (99.82) wrote:

Cheek, those numbers are completely hallucinatory, so please don't try and present them as anything other than fantasy.

 

And, for the second time, you are accusing me of lying in the disclosure that clearly states I have no position in the stock. Either present some evidence to the contrary, or admit that you are spreading falshoods.

 

Thanks,

 

Sj 

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#5) On March 11, 2007 at 3:23 PM, imagesone (< 20) wrote:

I love trading ALTI:

excessive hype by company(go long); followed by emotional rant from Motley Fool(cover and short); followed by hype then rant; then hype....

Great volatility and ample shares outstanding.

In the end neither the hype or the ranting matters.

From the conference call and numbers, there is no way they make any money this year.

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#6) On March 14, 2007 at 12:10 AM, Terch (23.80) wrote:

Did anyone else pick up on aheil's comment "But investors are concerned with a company's stock price and the stock price alone"?

aheil, speculators are concerned with a company's stock price, investors are concerned with a company's underlying fundamentals, of which ALTI's are very poor! 

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