Nano Dimension (NASDAQ:NNDM) has been living life in the fast lane of small-cap stocks. NNDM stock is up 422% in the last 12 months. And yet for investors, timing is everything. If you bought the stock on Jan. 4, you would be sitting on a loss of 8%. What would make that loss feel a lot worse is that you would have previously gained nearly 100% .
The company got a major boost early in the year when Cathie Wood, the CEO of ARK Investment Management, announced she was backing the stock. And the shares got more buzz from rumors that the company was planning a major acquisition.
However, for all the promise of the company’s 3D printing technology (and 3D printing in general), investors have soured on NNDM stock. And short interest in Nano Dimension spiked by over 35% in March. So let’s take a look at what’s going on with the company.
Targeting a Niche in the 3D Printing Sector
Nano Dimension’s primary product is its DragonFly LDM system, which is used to create multi-layer circuit boards and ink products for DragonFly. One of the key products that DragonFly’s creates is printed circuit boards (PCBs). PCBs are required to power the electronic devices that make up the Internet of Things (IoT).
Research firm Data Intelligence forecasts that the revenue derived from electronics created by 3D printers would increase at a compound annual growth rate of 39.50% through 2027. And even the smaller niche that Nano is targeting — 3D additive manufacturing (AME) — is projected to grow by a compound annual growth rate of 24% through 2029.
Meanwhile, until recently, Nano Dimension has been primarily focused on delivering prototypes, rather than selling technology that’s widely adopted for mass production. As a result, the company will have difficulty adopting a business model that relies less on hardware sales and more on its ink cartridges and software that will provide recurring revenue.
The Company Has Enough Cash… for Now
Another bullish argument that I’ve read for NNDM stock is that the company has a strong cash position because of funds it raised by selling its stock in 2020. And on paper, that would certainly seem to be the case.
As of the the end of 2020, it had $671 million of cash and bank deposits on its balance sheet. And by the end of February, that balance had jumped to nearly $1.5 billion.
However, the company’s CEO, Yoav Stern, is actively pursuing growth through acquisitions. If Stern makes acquisitions, the company’s cash position will deteriorate.
On the other hand, some are optimistic that Nano will become the hunted instead of the hunter. Indeed, given Nano’s strong cash position, it could easily become a takeover target.
Is NNDM Stock a Buy?
Nano has raised capital in every year since 2013. But prior to 2020, the company was burning cash at an alarming rate. Now Nano appears to have raised enough cash for the time being, but I don’t see any evidence that it will be able to generate enough cash to support its operations going forward. And given the company’s stated desire to grow through acquisitions, I’m not sure it is upbeat about its short-term prospects.
I’m sure bullish investors will say that the stock, which was trading below $1 just a year ago, has come very far. But if 2020 taught us anything, it’s that investors don’t need a reason other than low prices to bid up penny stocks.
Nano needs to show me more before I can say that NNDM stock is a buy.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.