What happened

Shares of Aterian (NASDAQ:ATER) are making big gains on Tuesday. The company's share price was up roughly 14.5% today as of 11:30 a.m. EST.

Aterian published third-quarter results after the market closed yesterday, posting better-than-expected sales for the period and setting up the rally for the stock on Tuesday. The company posted a loss of $3.13 per share on revenue of $68.12 million, while the average analyst estimate had called for a loss of $0.17 on sales of $63.03 million.

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So what

Aterian is an e-commerce company whose core business revolves around finding products that are in high search demand on Amazon (NASDAQ:AMZN), and then coming in with products to fill the demand. Usually, it does this through acquisitions or through licensing deals.

Its net loss of $110.6 million in the third quarter came in way above the market's expectations, but this was primarily due to the company taking a $107 million loss on the extinguishment of debt -- and not particularly worrying in context. Instead, the market is focusing on sales climbing 16% year over year and coming in significantly ahead of the average analyst target.

The company's gross margin also improved to 50.2%, up from 47.8% in the prior-year period, which was encouraging because the business has been facing supply chain headwinds. Management responded to these challenges by raising prices and noted that it had an adverse impact on sales volume, but margins held up pretty well. 

Now what

Aterian attracted attention earlier this year as a potential short-squeeze and meme-stock play, but it fell out of favor for investors seeking related catalysts after the company announced it would issue new shares to pay down debt. For now, it looks like the stock is primarily back to trading in relation to business news and fundamentals. 

Aterian is seeing continued headwinds from the pandemic and related supply chain constraints, but the company expects that it will be able to accelerate growth in 2022 through internal initiatives and the resumption of its mergers-and-acquisitions strategy.

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