Nano Dimension Isn’t All About Betting on a Short Squeeze

Focusing on additive manufacturing (AM) of electronics, Nano Dimension (NASDAQ:NNDM) specializes in fast prototyping capabilities, helping client companies meet tight production deadlines while delivering cost savings. What’s more, NNDM stock is actually fundamentally relevant without the social media furor surrounding it. Still, an extra tailwind never hurt.

Nano Dimension logo in an iPad, on the background their proprietary 3D printer
Source: Spyro the Dragon / Shutterstock.com

In this case, many folks are speculating that the AM firm will be the beneficiary of a short squeeze — the often dramatic rise of an equity unit which features heavy short interest. Because bearish traders must cover their positions by purchasing the shares they borrowed to initiate the short exposure, the resultant buyback can be an extremely powerful catalyst.

Combined with the relatively cheap price of NNDM stock (think the law of small numbers) and its prior run that culminated in a closing price of nearly $17, speculators are naturally interested in rolling the dice again. From the price at the time of this writing, traders could more than double their holding’s value should NNDM reach this year’s closing high.

But just how likely is this short-squeeze narrative? Even though I own a modest position in NNDM stock myself, I’m going to stay consistent with my short-squeeze reasoning. I didn’t actually buy shares for this potential, although there is an outside chance that the bulls can send the bears running.

NNDM Stock and the Possible Squeeze

So, before we get into the fundamentals behind Nano Dimension, it’s probably best to cover the squeeze potential that’s mostly creating today’s hype.

From the latest available read (Jun. 30), the short percentage of float for NNDM stock is nearly 10%. Frankly, I’m not going wild over this stat, although usually anything in double-digit territory represents considerable bearish sentiment.

However, my concern regarding a potential short squeeze is the short interest ratio or days to cover. At less than two days (1.6), bearish traders could theoretically cover quickly if their positions become too risky.

Thus, I wouldn’t bet everything on doing damage to the bears here.

Burgeoning Relevance for NNDM Stock

Having said that, this doesn’t mean I don’t believe NNDM stock could move higher. We’ve all seen what the concerted efforts of internet forum members like the ones on Reddit can do in the equities sector. And, while I can’t prove it, I’m almost certain that many major investment analysts are tasked with looking through various social-media posts and deciphering the next opportunity. If respect was something these retail traders were after, they’ve certainly got it.

Of course, NNDM stock fits the profile of your typical meme trades. Therefore, betting against it would probably not be the wisest move considering the circumstances.

But again, I’m not so much interested in the meme trade (if it even exists for NNDM stock) as much as I am the fundamentals. What’s particularly intriguing at this moment is Nano’s DragonFly system. A precision AM platform, DragonFly promotes “agile hardware development and innovative circuit design” for multiple industries.

Further, one of the industries Nano serves is the automotive sector, which is incredibly fortuitous. The company says the following about how its AM system fits into that use case:

“The additive electronics from Nano Dimension enable fast prototyping and manufacturing of conductive components, encapsulated sensors and smart surfaces, all of which can offer car makers the flexibility of printing an entire circuit board or just part of a connector […] Its ability to 3D print electronics on unique and non-standard shapes is being used for the rapid prototyping and manufacturing of highly sensitive and sleekly designed human-machine interface surfaces.”

As you’ve probably seen, used car prices have skyrocketed due to rising demand and limited supply. The latter is largely due to supply-chain disruptions in the global semiconductor industry. According to the Taipei Times, this chip shortage could last until 2023, posing huge challenges for automakers.

Therefore, the auto industry will need a smarter, more effective avenue of production, particularly for their research and development efforts. That dynamic could spark greater demand for NNMD stock and its AM system.

NNDM Stock Is a Reasonable Bet for the Patient Speculator

Despite the recent and acute relevance for Nano Dimension, NNMD isn’t what you would call the most comforting investment. Given its small annual revenue and consistently negative net income, the company has an aspirational aura for sure.

At the same time, though, the AM industry should become more and more relevant. This is especially likely as a combo of the pandemic and geopolitical competition creates greater constraints on the supply chain. Therefore, if you’re patient, NNDM stock could work out later on.

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On the date of publication, Josh Enomoto held a long position in NNDM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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