Desktop Metal (NYSE:DM) stock was introduced to the trading public late last year after completing its merger with special purpose acquisition company (SPAC) Trine Acquisition.
Over half a year later, DM stock trades on high daily volume and has generated plenty of interest.
Just to give you the basics, Desktop Metal specializes in providing integrated additive manufacturing solutions.
The company’s target markets include automotive, aerospace, healthcare, consumer products and more.
In other words, Desktop Metal’s business model is both broad-based and specific. That might sound great, but to be honest, DM stock hasn’t performed well during the past half-year.
Yet, 2021 isn’t over and the story of Desktop Metal could still have a happy ending.
As we’ll see, the company’s in surprisingly good fiscal shape – and there’s a business combination in the works that could cement Desktop Metal’s niche-leadership position.
A Closer Look at DM Stock
It’s probably not a coincidence that DM stock skyrocketed to stunning heights during the peak of meme stock mania.
I can’t prove that Reddit users targeted Desktop Metal for a short squeeze in January and February. However, I’d like to propose that it’s a distinct possibility.
Consider this: DM stock flew from $16 and change at the beginning of 2021, to a 52-week high of $34.94 on Feb. 8.
We’re talking about a doubling of the share price, without a company-specific catalyst to justify a move of this magnitude. I’ll let you decide whether Reddit traders had a hand in this. In any case, the rally wasn’t destined to last for very long.
Starting in mid-February, DM stock plummeted below $20, and eventually below $10. By early September, the share price was slightly above $8.
At the same time, Desktop Metal’s trailing 12-month earnings per share was -45 cents. Sure, that’s negative, but recent financial data suggests that the company is on track to improve its fiscal position. So, let’s delve into the stats now.
Undeniable Revenue Momentum
To put it bluntly, Desktop Metal really knocked it out of the park with the company’s second-quarter 2021 financial results.
Starting with the top line, Desktop Metal generated $19 million in revenues, signifying a 68% sequential (quarter-over-quarter) improvement.
Next, we can cite the company’s quarterly non-GAAP gross margin of 25%. That’s a huge improvement over the 5% recorded during the first quarter of 2021.
On top of all that, Desktop Metal ended the quarter with a strong liquidity position. Specifically, the company had cash, cash equivalents and short-term investments of $514.5 million as of June 30.
Looking toward the future, Desktop Metal reaffirmed its ambitious projection of over $100 million in revenues for 2021. Not too bad, I must admit.
Nearly Doubling the IP Portfolio
In case you need further evidence of Desktop Metal’s powerful position in the additive manufacturing industry, here’s a game-changing development for your consideration.
Not long ago, Desktop Metal announced it entered into a definitive agreement to acquire The ExOne Company (NASDAQ:XONE).
Desktop Metal describes ExOne as a “Pioneer in binder jetting technology and a leader in sand 3D printing with a strong position in metal, metal composite, and ceramics 3D printing.”
Obviously, this business combination should enhance Desktop Metals’ position in the 3D printing market. However, the ramifications go beyond that.
Believe it or not, the ExOne acquisition will nearly double Desktop Metals’ intellectual property (IP) portfolio to more than 650 patents (including issued and pending patents).
These will cover contoured roller technology, printable ceramic inserts, advanced de-powdering and many more patent fields.
Desktop Metal founder and CEO Ric Fulop emphasized that the business combination could usher in a new era in additive manufacturing as we know it. He said the deal would improve customer selection and choice.
“This transaction is a big step in delivering on our vision of accelerating the adoption of additive manufacturing 2.0,” Fulop added.
The Bottom Line
There’s no denying that DM stock fell flat after its early-year flight.
On the other hand, the lower price point in Desktop Metal shares isn’t necessarily a bad thing.
And given the company’s excellent financial standing – along with its fast-expanding IP portfolio – it might just be time to consider taking a position in Desktop Metal.
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.