Analysts expect this semiconductor company to grow at a rate more than 29% this year.
Atomera Incorporated (ATOM)
From Technology & Opportunity
As IEEE Spectrum explained in a 2018 post last summer: ‘From the headlines, you’d think all the action in chip making was happening at the industry’s cutting edge, where top manufactures are racing toward the so-called 7-nanometer node. But there are ways to make better ICs besides
forcing them to follow Moore’s Law down to the bitter end.”
Here, IEEE Spectrum is actually referring to a specific and recent innovation known as Mears Silicon Technology (MST), which was developed by a little-known technology company by the name of Atomera Incorporated (ATOM). MST works by inserting a thin layer of oxygen just below the surface of a transistor’s silicon to improve electrical current (effective current increases of 10% to 20%), reduced resistance (50% reduction in channel on-resistance), and lower leakage (2.7x lower gate leakage). In turn, the technology can boost speed, lessen variability between devices on the same chip, improve reliability, and even increase battery life.
In an industry where leading-edge processes are now costing more than $1 billion to develop, MST can improve an existing process for somewhere in the tens of millions of dollars. The total gains are estimated to be equivalent to a half-node to full-node die shrink at a fraction of the cost.
MST, in other words, will enable chip designers to improve their systems up to a full generation without the massive expense required to shrink transistors any further. The technology can be used across all different process nodes, from legacy analog to those still in development today.
The timing looks solid for investors today, as Atomera has just begun to license its technology to leading chipmakers. The company has already scored licensing deals with Asahi Kasei Microdevices and STMicroelectronics (both are currently working towards their production goals) and is now “engaged” with at least half of the world’s top semiconductor companies.
Atomera also has zero long-term debt and $15.14 million in cash. The company has $15.9 million in assets in just $1.0 million in liabilities, making it extremely lean as it enters this new stage of commercialization. Atomera’s management expects a market that’s worth around $660 million in annual royalties. At a $70 million market cap, this makes the company a compelling speculative bargain, considering that it has the patent protection (200 patents granted and pending) to be the only company licensing MST.
Atomera’s IP-licensing business model is easy to like because it’s capital-light, which means we’ll see high margins on adoption. The revenue isn’t there yet, but with Moore’s Law stalling out, there’s a very good chance MST begins to gain a lot of traction over the next couple years. In fact, I would not be surprised to see MST become an industry standard in the near future.
There’s some financing risk here, as Atomera has about a year left at its current burn rate, but it’s a risk we’re willing to take in light of the potential reward. Based on management’s remarks in the latest conference call, there’s a potential revenue windfall coming in toward the back half of the year. We want to build a position before any relevant deal is announced.
We rate Atomera a “Buy” under $5.00. The risk-level is “Medium-High.”
Jason Stutman, Technology & Opportunity, www.angelpub.com, 877-303-4529, July 2019