I love the mysterious references to “alien minerals” and “secret compounds” that we sometimes see in teaser ads, and the latest pitch from Trend Trader Daily jumps right out with that in the headline:

“50,000 Year-Old ‘Alien Mineral’ Could Hold the Key to Unlocking a $7 Trillion Market”

Followed, of course, by the required “one tiny company” reference, right up there at the top of the pitch:

“And One Tiny Company Could Be Your #1 Way To Profit From It…”

With plenty of promises of big gains…

“According to my research, you could pocket gains of 512% to 2,846% (or more) from this single trade…

“In fact, as I write this, this stock has more than doubled in the past six months alone — which is why I urge you read this entire briefing, in full, before this stock could rocket even higher!”

So… all minerals are “alien,” I guess, if you go back far enough — the top layers of the earth, where we might conceivably do our digging for stuff, have been collecting stardust and meteorites and other gifts from the universe for millennia, but still, if it’s gonna make us rich, we want as much of that alien stuff as we can get, right? Sounds like the makings of a good comic book adventure.

What Michael Robinson is selling with this adventure is a new (to me) publication, called The TEN-X Report ($995/yr, no refunds) — we haven’t covered this one before, so perhaps this is his first “new” newsletter at Trend Trader since he took over the business from Lou Basenese… the TEN stands for Technology, Energy and National Security, apparently, so it has a fairly broad sector focus. Robinson has been around for ages, mostly touting fairly early stage tech and biotech stocks for a few different publishers.

Here’s some more from the ad:

“… roughly 50,000 years ago, the planet earth received an unexpected visitor — an ‘alien’ visitor.

“And while this visitor wreaked havoc upon on our planet…

“It accidentally left behind an extremely valuable gift.

“In fact, this gift could now be the key to unlocking one of the most groundbreaking technologies of our time.”

And I guess he’s referring to one of the more violent “visits” from our alien friends, since he shows a photo of Barringer Crater in Arizona…

“It was formed when a meteorite slammed into the earth 35 times faster than the speed of sound.

“To put that in perspective, it would be like dropping an atomic bomb on Nagasaki — 500 times!”

And that’s where our “Alien Mineral” came from, I guess…

“This Meteorite Left Behind What Could Literally be a ‘Gift from the Heavens’

“Call it ‘Divine Intervention’ …

“Or call it pure dumb luck.

“But 50,000 years ago, this meteorite deposited something on Earth we’re only just realizing the true value of.

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“Which is why I’m yelling ‘Hallelujah!’ from the hilltop!”

He even shows a photo of that “gift,” which looks like a chunk of asphalt that someone dropped some colorful aquarium pebbles on while it was cooling…

“… a material I’m calling ‘The Miracle Mineral.’

“It was first discovered 130 years ago in the Barringer Crater.

“Initially, it was called Carborundum.

“And what makes this ‘miracle mineral’ so special is that it very rarely occurs naturally on Earth!

“One of the only instances of this mineral being found on Earth was from the 50,000-year-old meteorite in Canyon Diablo. Which is exactly why I’m calling it a ‘Miracle Mineral.'”

OK, so carborundum is more typically called silicon carbide these days — it’s mostly made artificially, for use as an abrasive, but it does also occur in nature, with the natural ore called Moissanite that does originate from meteorite strikes… though to make it a bit more confusing, Moissanite is also a name commonly used for artificial diamonds made for jewelry. So what the heck is he talking about here? We’ll have to keep digging… apparently it’s got something to do with electric vehicles, of all things…

“… every single dollar of the EV rollout is being held hostage by this ‘Alien Mineral’….

“We’re the midst of a massive goldrush in the EV market…

“And I recently identified a tiny company that could become “the next Intel” for this industry.

“In fact, this stock has doubled in the past six months alone.

“But I believe we’re only just getting started with the potential profits we could see here.”

Then he makes an argument that sounds pretty spurious to me — that the thing holding back EVs is the power consumed by the car’s computers, not by the electric motors that move the car:

“For electric vehicles, the ‘brain’ is the sophisticated computer that controls everything from making the wheels spin to making the windshield-wipers wipe.

“And because computers — especially sophisticated computers that run electric vehicles — require a tremendous amount of processing power…

“They need to pull a great deal of power and electricity from the battery.

“Historically, most computers have run on basic silicon microprocessors….

“This is actually what’s been holding back the EV market.

“You see, Silicon works fine on your desktop. But in a car — where there’s far more extreme conditions and higher temperatures — standard silicon microprocessors just don’t perform as well.

“Mainly, they lose energy faster…

“Which in turn, forces them to pull more and more power from the battery…

“This kills the range of EVs!”

Sounds a little fishy, right? I’m not an expert on engineering, but I would be shocked if the biggest drivers of EV range weren’t the power requirements of the motors that move the wheels… and second-biggest is probably the car’s heat/AC systems. It would be surprising to me if your EV’s computers consumed more power than either of those… but, like I said, I’m not an engineer and I won’t belabor the point. Suffice to say, he thinks EVs are moving to a new kind of material for their chips.

More from the ad:

“That’s why the EV industry is rapidly shifting to a new type of microprocessor…

“One that can operate at much higher temperatures…

“Lose much less power…

“And expand the range of electric vehicles.

“As you’ve probably guessed by now, those new microprocessors are all based on the alien ‘Miracle Mineral’ I’ve been telling you about!”

And this is probably more to the point, I gather: Robinson says these chips can speed up battery charging, which is a major concern for EV owners…

“Studies have shown that this mineral can increase the range of an EV and dramatically speed up charging times.

“More specifically, it can add up to 15% to an EV’s driving range…

“And decrease charging times from many, many hours… down to just 30 minutes!”

With a quote from someone who should now, a VP at General Motors:

“Customers of EVs are looking for greater range, and we see [miracle mineral] as an essential material in the design of our power electronics.” — Shilpan Amin

We’re told that sales of this “miracle mineral” were $3 billion last year, which is a pretty big number but not on par with the big fellas — copper sales probably hit $170 billion last year, for example, so that puts it in a little context.

And yet, we don’t get much in the way of clues about our specific company yet…

“I believe there’s one specific company that’s perfectly positioned not only to capture a significant share of this exploding market…

“But also to see the most potential upside for its stock price.”

When we get down to it, though, we’re on to second or third derivatives of this mineral that landed on earth in mineral strikes… we’re not talking about a miner who digs for rare Moissanite, or even a company that manufactures silicon carbide, we’re talking about the silicon carbide chips themselves.

But it goes further still… Robinson isn’t touting silicon carbide chips, or a company that makes them, he’s touting the company who makes the testing devices for silicon carbide chips, because these chips have a high failure rate and need rigorous testing.

So that’s your argument: EV makers will want to use silicon carbide chips –> therefore companies will have to make more of them –> but they aren’t very good yet –> so the company that provides testing equipment to silicon carbide chipmakers should see their business grow.

Got it? OK… here’s a bit more from Robinson, fleshing that out:

“Silicon Carbide chips are much more difficult to produce than traditional silicon chips.

“More specifically, Silicon Carbide chips have a relatively high ‘failure rate’ …

“It ranges anywhere from 1% to 3%….

“EV makers need to do everything they can to ensure these chips are in perfect working condition before they put them into a vehicle…

“And the way they do that is through a rigorous series of tests known as ‘burn-in testing….’

“It’s the equivalent of putting these chips through a full years’ worth of wear and tear in just several hours…

“This way, if a chip is going to fail, it does so during this test, instead of when a car is on the road.

“That’s why industry analysts at Persistence Market Research expect demand for chip-testing solutions to explode in the coming years…

“Reaching $23 billion by 2033.”

OK, so get that dramatic story of the meteor falling on Arizona out of your mind… what we’re looking for here is a semiconductor capital equipment company that makes “burn in” testing equipment for silicon carbide chips.

Man, this is getting less fun already.

Still, we persist. Which chip testing company does he like?

“The company I’ve identified performs its burn-in testing in a completely different way…

“It uses a patented system it’s developed…

“A chip-test system that’s 100% contactless….

“No need to physically ‘poke and prod’ every single chip, one at a time.

“This company’s technology allows it to test many chips at once —without poking and prodding them many times individually.

“This gives this company a tremendous advantage over its competition.”

OK, now we’re getting somewhere. It is pretty hard to break into the semiconductor capital equipment business, once these fabs are set up and have their systems they tend to be very slow to change, if only because of all the testing and tuning that goes into making a semiconductor line run efficiently and produce chips with low error rates and low waste, but chip equipment can certainly be a good business if you have a defensible niche… or a better mousetrap.

Here’s how Robinson says they’re better:

“Existing technologies can test one batch of chips — these are called ‘wafers’ — in about half a day.

“So at most, they can process two wafers per day — or 730 wafers per year.

“This company, on the other hand, can test up to 36 wafers per day…

“Or 12,600 wafers per year!

“That’s an efficiency improvement of roughly 1,800%!”

And then we finally get to some helpful specifics about this company… or as we like to call them here at Stock Gumshoe, “clues.” More from the ad:

“In 2020, this company generated just over $13 million in sales.

“But over the past 12 months, it’s generated over $61 million in sales.

“That’s a growth rate of 352% in just two short years….

“…in 2022 the company also hit another major milestone…

“It turned its first profit in years!”

OK, so it’s not very big — $61 million in sales puts you right down at the bottom of the semiconductor equipment sector, near “start up” range. The granddaddy of the sector, Applied Materials, does about $26 billion in sales a year. But we’re not complaining, it’s a good clue.

Anything else? We do get a nice little stock chart of the company’s past six months or so, demonstrating that it was around $15 way back in October, peaked at about $40 in March, and is now down in the $20s somewhere… and the company is getting some orders that sound pretty impressive, particularly in light of the fact that their revenue is only around $60 million…

“[top secret company] Receives $25.1 Million Order…” — January 20, 2023

“[top secret company] Receives Over $4 Million in Orders…” — November 4, 2022

And then we get into the daisy chain of “what-ifs” from Robinson — this is a dangerous road to go down if you’re spitballing about a little company, so be forewarned on that, but this is how he says it could go in his “conservative forecast” (here’s a tip for you: When a newsletter pitchman uses the words, “conservative forecast,” move the decimal point over at least one space to the left):

“This tiny company generated just $62 million in sales over the past 12 months, and it’s only just become profitable again….

“On top of that, this company is rapidly growing its revenue and customer base…

“And has a technology that’s 18x better than the competition….

“The EV market is expected to grow to anywhere from $7 trillion to $46 trillion.

“That will drive demand for Silicon Carbide, growing the market to $12 billion in the coming years.

“And in turn, that will drive demand for chip-testing, which is forecasted to exceed $28 billion in just 10 years.

“With this company’s momentum and its superior technology, it could potentially capture the lion’s share of this market….

“Over the past five years KLAC’s stock has tripled — giving it a market cap of roughly up to $55 billion.

“Again, to be conservative here, let’s say the tiny company I’ve been telling you about today reaches just a tenth of KLAC’s market cap…

“If that were to happen…

“Based on that fact that as I write this, the company is trading at a market cap of just $900 million…

“That would mean a gain of roughly 512%.”

So that’s what leads to his range of possible outcomes — he arbitrarily decides that this company is so good that it will become 1/10th the size of one of the leading chip equipment companies, and if that randomly generated large competitor happens to be KLA Tencor, well, that would be a 512% gain… if it’s the Dutch chip equipment giant ASML (ASML), well then you luck out and it’s a 2,846% gain for you.

These comparisons are completely spurious, of course, the company’s fate will mostly depend on what kind of sales they can make, and how much of those sales they can keep as profits. That, in turn, will depend on whether their “18X better” technology actually is better, and leads lots of semiconductor foundries to buy it, and whether they can charge enough for it to make good margins on the business.

The bait they’re dangling for this TEN-X Report subscription is Robinson’s special report about this company, titled “The Perfect Pick & Shovel Play to Profit from the EV Goldrush.” So what, you ask with an exasperated air, is this secret stock?

Thinkolator sez: this is Aehr Test Systems (AEHR), which is indeed, at least in their words, a “leader in silicon carbide die stress testing.” And yes, the photo of testing equipment that Michael Robinson uses in the ad is of AEHR’s FOX-XP system. Here’s how they describe themselves:

“Headquartered in Fremont, California, Aehr Test Systems is a worldwide provider of test systems for burning-in and testing logic, optical and memory integrated circuits and has over 2,500 systems installed worldwide. Increased quality and reliability needs of the Automotive and Mobility integrated circuit markets are driving additional test requirements, incremental capacity needs, and new opportunities for Aehr Test products in package, wafer level, and singulated die/module level test.”

AEHR was roughly a $900 million company a few weeks ago, though it has come down 20% or so and now, at $26, has a market cap of about $740 million. This has been a barn-burner of a stock over the past couple years, it’s up about 10X since mid-2021, which is when they got a couple big orders for their equipment and boosted their revenue outlook and really started to catch investors’ attention. The combination of big orders and the connection to the hot EV story really drove the stock dramatically, breathing new life into a company that had been a pretty “meh” microcap in this space for decades.

They’ve been making sales for a very long time, with revenue generally ranging from $10 million in bad years to $40 million in good years in the past, but for whatever reason they never really got the growth going in any sustainable way. Perhaps that’s about to change now, they did have about $63 million in sales over the past year, which is well over their previous peak ($41 million in 2008), and the trailing net income is now up to $14 million, also a peak (it was at about $10 million 15 years ago, the last time they really had a profit).

The difference, of course, is that back in 2008 there were about eight million shares of AEHR, and now there are 28 million as they’ve raised more capital, so on a top-line valuation ratio they really peaked in 2021 at about 30X sales, and today they’re still at about 12X sales, while the last time they reached profitability, 15 years ago, they were valued at about 1X sales. So that’s the cautionary tale note for you: Back in 2008, investors probably also thought things were about to get exciting, and, for whatever reason, it fell apart. Who knows, maybe it was the market collapse that year that put them back on ice for a while, or maybe their products weren’t good enough yet and have improved now.

And yes, the rise of silicon carbide (SiC) chips is not just a story Robinson made up for AEHR — and electric vehicles are one of the key market drivers for these chips, since they are much more robust than silicon chips, they can handle higher voltages and higher temperatures (aerospace is also a big demand driver). Analysts have forecast pretty dramatic growth for the SiC market, mostly because of EVs — sales of these chips are widely expected to grow much more than 10X over the next 6-8 years. The big companies that make a lot of these SiC chips, and are expected to make more of them, include many suppliers to the automotive market like Infineon (IFX.D, IFNNY), ON Semiconductor (ON) and STMicroelectronics (STM).

I don’t think I’ve ever written about AEHR, but it sure caught the attention of investors during its big run over the past couple years, and it has been mentioned by a number of folks in past comments on the site. They do actually have one or two analysts covering the stock and providing estimates, now that they’ve burst out of “penny stock” land and into the realm of “small cap” stocks — those analysts both call it a “buy”, and think the earnings are about to ramp up from 42 cents per share in FY22 to 58 cents this year (which ends in a month), and $1.02 next year. If they’re right, that means AEHR shares are trading at about 45X current earnings and 26X forward earnings — not objectively cheap, but awfully reasonable for a company that’s growing at 40% or so. Assuming, of course, that they continue to grow from here. As is pretty often the case, the two analysts who cover this small cap stock happen to be from the two small investment banks that helped AEHR raise money recently, so it might be reasonable to assume that they’re on the optimistic side.

AEHR is just about to finish up their fiscal year, and the last update from the company was their fiscal third quarter on March 30, in which they reaffirmed their guidance and said they expect profit margins to remain strong. Here’s what they said on the conference call:

“Total bookings for the fiscal year-to-date, including the over $9 million received in March is $72.5 million, exceeding our total bookings of $62.2 million for the full prior fiscal year.

“Now turning to our outlook for 2023 fiscal year, which ends on May 31, 2023, we are confident in the company’s growth trajectory and our unique capabilities and product offerings to meet customer demand. As such, we are reiterating our previously provided guidance for full yield total revenue of at least $60 million to $70 million representing growth of at least 18% to 38% year-over-year, with strong profit margins similar to last year. We continue to expect bookings to grow faster than revenues in fiscal 2023 as the ramp in demand for silicon carbide and electric vehicles increases and we build momentum going into fiscal 2024.”

They haven’t updated their Investor Presentation since last year’s LD Micro conference, but it still gives the basic overview… and they’ll be making the rounds of investor conferences in May, so there may be some updates (and more attention flowing to the shares) in the weeks ahead. It’s an interesting little explosive growth story, and they are planning to expand production (they’ve leased more space), so the company is certainly optimistic.

Are you? It’s your money, so you get to make the call — revenue and earnings are likely to be lumpy, since they depend on big orders and are coming from a small base, but it’s very definitely a “story stock” that seems to have the attention of a lot of small-cap traders, and that will tend to make the share price pretty volatile whenever there’s good or bad headline news out of the company. Don’t know enough to get involved at this point myself, and I don’t know what the testing market is like for SiC chips or whether they have meaningful competition… but it’s at least an interesting story, and companies who are emerging into sustainable earnings growth for the first time can certainly supply an exciting ride. Do let us know what you think of AEHR with a comment below…

Disclosure: I do not own any of the stocks mentioned above, and will not trade in any company covered for at least three days after publication, per Stock Gumshoe’s trading rules.