Down more than 70% for the year through the Monday, Aug. 15 session, imaging service provider and specialized camera manufacturer Matterport (MTTR) has been struggling to maintain investor interest. However, over the past month, a positive spotlight has shined on MTTR stock, with the security moving up nearly 47%. A better-than-expected performance for the company’s second quarter also helped. Nevertheless, rumblings in the options market suggest the ride could soon come to an end.
For now, momentum favors the bulls regarding MTTR stock. Last week, the imaging service platform delivered a quarterly loss of 12 cents per share. While this figure remains frustratingly in negative territory, it managed to beat Wall Street’s consensus target for a loss of 14 cents. Further, the latest posting compares very favorably to the year-ago quarter’s loss of 62 cents.
According to data from Zacks Equity Research, Matterport surpassed consensus estimates for earnings per share three times over the last four quarters.
On the revenue front, the picture was mixed. The company rang up sales of $28.5 million, which missed the consensus target by 3.24%. Also, the top line slipped against the year-ago level’s result, which was $29.5 million. However, drilling into the details, Matterport enjoyed a “20% jump in subscription revenue to $18.4 million and a 74% surge in services revenue to $5 million.”
Finally, Matterport raised its annual outlook for total revenue and earnings, strongly implying internal confidence to facilitate its recovery narrative. While the storyline has been bullish for MTTR stock so far, some traders now see the end of the party.
The Bears Target MTTR Stock
Following the end of the Monday session, MTTR stock lit up the scoreboard in terms of unusual options activity. Specifically, traders piled into the $5 puts with an expiration date of Sept. 16, 2022 (shares closed in the open market at $5.78). Volume reached 10,266 contracts against an open interest reading of 269.
Moreover, the bid-ask spread as represented by the midpoint price (23 cents) was 21.74%. While some options contracts can feature wide spreads, this example is particularly noteworthy. For one thing, the circumstance indicates a lack of liquidity for the trade. Another point to consider is the market maker’s confidence in properly placing this transaction.
While MTTR stock is up big during the trailing month, it suffered a 4.6% loss on Monday (though it gained about 1.9% during the afterhours session). Following weeks of robust gains, the sharp pivot toward a bearish posture has unsettled many market participants. Therefore, it’s not that shocking that the spread for MTTR puts is so wide; basically, market makers want to protect themselves.
Adding to the confusion is that the put/call open interest ratio is 0.31, which presently indicates bullishness (more traders are buying calls than puts). Given how wild trading for MTTR stock is historically, however, performing another 180 wouldn’t be that unusual.
Fundamental Concerns to Watch
During Matterport’s Q2 earnings presentation, management highlighted subscription revenue, which continues to grow sequentially every quarter. Further, the leadership team stated that subscription and services combined grew 29% on a year-over-year basis. In addition, the company experienced a record product backlog exiting Q2, a reflection of pandemic-related disruptions that, when finally addressed, could yield greater positive performances for Matterport.
Still, the subscription revenue appears to depend heavily on the real estate market. In another section of its Q2 earnings presentation, Matterport cited information showing that 82% of prospective homebuyers would switch to an agent offering 3D tours. This breaks down to 94% of Generation Z, 83% of millennials and 63% of Gen X.
Moreover, Matterport mentioned Redfin (RDFN), which noted that 71% of homebuyers would purchase a home sight unseen if the listing had a 3D tour. Though intriguing, such data may no longer be relevant.
Essentially, with the purchasing power of the dollar declining 5.3% in the first half of this year (compared to a loss of 6% in all of 2021), homebuyers no longer have the luxury of ignoring broader economic dynamics. At scale – especially for a home-purchasing scale – a 5.3% currency erosion translates to significant value lost.
In some ways, Matterport is selling tickets to last year’s Super Bowl – and the bears appear to be sensing this vulnerability.
Shifting Paradigms Don’t Support Matterport
On a final note, the high interest rate environment that we’re in imposes another headwind for MTTR stock. Aside from the global health crisis, another reason to consider buying a home sight unseen was to outbid competitors in a shock-and-awe act.
Today? While it’s not a complete 180, higher borrowing costs have slowed home sales. Without the same intensity of competition, homebuyers have even less reason to rely purely on imaging technologies to make their final decision. With the economic paradigm shifting, the bearishness in MTTR stock appears to make fundamental sense.
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