By all accounts, Weebit Nano Ltd [ASX:WBT] is one of the biggest winners of 2020.
Its ReRAM memory has captivated the market’s attention. This is underpinned by the strain that the pandemic has placed on all our digital systems and devices.
If the company’s claims are anything to go by, ReRAM could be a game-changer.
According to WBT, it’s 1,000 times faster and 1,000 times less power-intensive. Truly a ‘quantum leap’, as the company puts it.
Shareholders have been more than willing to buy into the potential of ReRAM, too, bidding the stock up from 30 cents at the end of August to $2.15 at the start of this week. A phenomenal return on a stock that doesn’t even have a finished product yet.
Today, though, expectations seem to have been somewhat tempered. The stock has endured its third straight day of declines — shedding a further 9.59% at time of writing.
So, should shareholders be concerned?
Pricing in speculation
With no commercial product and no revenues, Weebit is a speculator’s dream.
The kind of stock that is valued purely on its potential to disrupt a massive market. Which, suffice to say, is at best a vague estimation and at worst a total shot in the dark.
Depending on who you ask, this company could carry a lot of different valuations. That’s precisely why it has such a volatile history of share price movement.
The latest surge in the stock, for example, came on the back of a quarterly update. An update that included no financial data, but purely updated on the company’s ReRAM development:
‘Weebit successfully verified its production process is repeatable and consistent as part of the technology stabilisation process. The company announced the milestone on 7 October, just after this reporting period and is now ready to transfer its technology to a production fab.’
Obviously, that’s a positive report, confirming that ReRAM is indeed suitable for mass production.
That’s all well and good — but the bigger question investors need to be asking about is demand. With no notable commercial contracts as of yet, no one really knows who will be buying these products. The only indication from Weebit seems to be ‘interest’ from China:
‘We continue to be buoyed by the level of interest in our technology coming from China, where we think there are significant market opportunities for Weebit Nano. We are continuing to work with our Chinese partners, as well as having ongoing discussions with other groups.’
Again, that’s fine, but interest isn’t going to keep this company afloat long term. It needs to start shifting product and making sales. Something that should come in time.
Right now though, again, it is all based purely on speculation and potential.
What’s next for Weebit?
For any Weebit shareholders or prospective investors, you simply need to evaluate the situation.
This is a stock that is carrying a $166 million market cap. One that has shot up the small-cap ranks in a matter of weeks.
While the sky may be the limit, ultimately there is no way of knowing what the future has in store for Weebit. There are simply far more questions than answers.
Granted, that doesn’t necessarily mean it is a bad stock — far from it. Early shareholders have had the chance to pocket some incredible gains on the back of this speculation. But the long-term value of this company is something that will only become clear in the coming months and years.
For anyone invested in this company, that is something you have be wary of. Because it could end in riches or tears.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
PS: For small-caps with a little more substance to them, check out our ‘high-value small-caps’ report — an analysis of four companies with solid fundamentals and solid growth trajectories. Get your copy, right here.
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