Fermi (NASDAQ: FRMI) reported Q2 results this morning, and investors didn’t like what they saw. The Texan real estate investor and private energy grid operator celebrated a 15-year anchor customer, delivery of key infrastructure components, and nearly $417 million of debt-based financing in the second quarter. But Fermi fell short on one crucial metric when it reported zero revenues again.
Zero is a lonely number
The company describes itself as a pre-revenue business, and the Q2 income statement didn’t even have a line for sales. That’s not a disaster in the context of three earlier revenue-less reports, but Wall Street expected better. Consensus top-line estimates range from $72 million to $148 million, depending on whose analyst polls you prefer.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Management expects to bring online the first 200 megawatts at its Project Matador site over the next six months, with revenue to follow as computing clients complete and populate their data centers. For now, Fermi runs massive construction projects with no proven revenue to show for it.
A speculative AI play with a lot to prove
In the bigger picture, Fermi remains an interesting but unproven alternative investment in the AI boom. The company aims to provide 8,400 acres of real estate and 1.5 gigawatts of electric power to AI hyperscalers over the next two years. However, the revenues remain hypothetical, while the cash burn is intense. As for Fermi’s stock, it’s down 23% in six months and 79% over the last year.
If Fermi delivers on its promises, it could become an AI powerhouse in the long run. Shares are trading at a modest 8.9 times forward earnings projections according to Finviz and 6.9 times forward earnings projections at Morningstar. However, the company has a lot to prove and a $4.3 billion market cap to defend. I see more downside than upside in this volatile stock.
Should you buy stock in Fermi right now?
Before you buy stock in Fermi, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Fermi wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $400,209!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,375,393!*
