Great ready for a wild, crazy ride. There’s no “safe word” you can use with Desktop Metal (NYSE:DM) stock as volatility is the norm and it could either be a multi-bagger or a widow-maker.
a scientist uses a 3D printer to make an orange golf ball
Source: Shutterstock
As for the company itself, some folks call Desktop Metal a 3D printing business. Personally, I think that’s too narrow and prefer to characterize the company as an additive manufacturing specialist.
Either way, Desktop Metal’s leading-edge material innovations can be applied to a broad range of industries. These include automotive, aerospace, healthcare and consumer products, just to name a few.
As we’ll see, this business model has allowed Desktop Metal to grow its revenues substantially. It seems, however, that not everyone is pleased with the company’s fiscal performance – and there may be a bargain here, as a result.
A Closer Look at DM Stock
Just to recap, Desktop Metal was introduced to the trading public late last year after completing its merger with special purpose acquisition company (SPAC) Trine Acquisition.
Not long after that, DM stock shot up like a rocket during the peak of meme-stock mania.
It’s entirely possible that Reddit users targeted Desktop Metal for a short squeeze in January and February. I’d be hard-pressed to prove this definitively, though.
Irrespective of the cause, DM stock soared from $16 and change at the beginning of 2021, to a 52-week high of $34.94 on Feb. 8.
It was all downhill from there, unfortunately. The Desktop Metal share price slid below the crucial $10 level during the summertime, and then it only got worse.
As of mid-November, DM stock was trading near $7 and still trending to the downside. It trades today at a little more than $6.50. When will the carnage end?
Hopefully, it’s just a matter of time before the investing community recognizes Desktop Metal’s true value proposition. Until then, there could be more price depreciation in the cards.
Pent-up Demand
At the beginning of November, the outlook seemed bright for Desktop Metal.
In order to “meet robust demand for the world’s fastest metal 3D printing technology,” Desktop Metal announced the opening of a new in-house manufacturing facility.
That’s a good sign for the company, wouldn’t you agree? Apparently, the market thought so, as it pushed DM stock higher on the day of that announcement.
According to the company, building the new facility is part of a plan to accelerate the production ramp-up of Desktop Metal’s Production System P-50 printer.
Founder and CEO Ric Fulop engaged in some bragging with this announcement, referring to the “pent-up demand” for the P-50 printer and boasting that Desktop Metal has “the fastest metal 3D printing platform.”
Heavenly Revenues, But a Bad Bottom Line
Braggadocio aside, Fulop had every right to tout Desktop Metal’s top-tier 3D printing technology, as well as the production facility’s build-out.
With that development, Desktop Metal was a darling of the market, if only for a moment.
But of course, the investing crowd can be a fickle one. They’ll love a company one day, then despise it the next.
When it comes to revenue growth, the market couldn’t possibly ask for more than what Desktop Metal delivered.
We’re talking about revenues of $25.4 million, up 34% quarter-over-quarter and a jaw-dropping 907% year-over-year.
Apparently, though, Wall Street’s experts were expecting $27.1 million in quarterly revenues. So, even the aforementioned result, outstanding as it was, wasn’t good enough.
Also, it must be acknowledged that Desktop Metal sustained a quarterly earnings loss of 26 cents per share. That’s much worse than the loss of 9 cents per share that Wall Street had anticipated.
The Bottom Line
Clearly, there’s a mixed picture here with Desktop Metal.
The company must be doing something right, if the demand for its 3D printers is so intense that Desktop Metal’s building a new production facility.
On the other hand, it appears that the company is having difficulty turning its revenues into bottom-line profits.
That, then, will be Desktop Metal’s challenge – and an opportunity to improve – in the coming quarters.
Meanwhile, the market shouldn’t dismiss this fascinating company, as Desktop Metal remains an additive-manufacturing innovator with undeniable growth potential.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
