Israeli 3D-printing specialist Nano Dimension (NASDAQ:NNDM) stock has underperformed in the past several years.
It has struggled to drive growth for its shareholders. The meme stock mania, though, propelled NNDM stock to highs of $17.80 earlier this year. However, the company continues to lack direction and offers little upside at this point.
NNDM stock has been on quite the roller-coaster run this year. It is one of the stocks that have benefited from the retail trading frenzy. However, the stock has now lost most of its gains from the early half of the year.
Despite the drop, it still trades at over 255x its trailing-12-month sales. NNDM stock has an overblown valuation at this point, and its questionable outlook makes a highly speculative bet.
Lackluster Earnings Performance
The pandemic has slowed down deliveries of Nano Dimension’s 3D DragonFly printers. It’s clients’ limited spending on equipment and the hoarding of cash reserves has limited growth.
In the six months ended June 30, 2021, revenues rose from $990,000 to $1.62 million. The increase in revenues is unimpressive considering it made roughly $2 million in just the fourth quarter. Moreover, its net loss for the six months was $22.9 million, which rose 121.6% from the prior-year period.
The massive increase in its net loss is attributable to its rising operational expenses. For the period, sales and marketing expenses rose to $8.72 million, which shot up almost 400% from the same period last year. The healthy increase in expenses is linked to payroll, share-based payment, and advertising costs.
In the past six months, general and administrative expenses were at a lofty $8.3 million, which also rose 329%. The massive increase was due to professional services expenses and share-based payments. More importantly, research and development expenses rose to $12.8 million compared to $3.6 million.
From the numbers, it is clear that the business is in its early stages of development. However, the issue is that it trades like a mature company with a market cap of over $1.55 billion. The printed electronics market is expected to rise from $592 million in 2021 to $2.4 billion in 2025. Therefore, Nano Dimension’s market cap is more than the industry’s output at this time.
One of the main concerns I have about NNDM stock is whether the company’s business is scalable. It’s operating in a relatively small market and hasn’t proved that its products can be scaled effectively at low costs. Hence, the chip shortage has led to businesses preferring conventional chip printing solutions rather than doing Nano Dimension’s fancy 3D solution.
Another problem is the lack of organic growth. This year, it has acquired DeepCube and NanoFabrica in improving the performance of its management team and printers. So, it appears that its business is essentially dependent upon what businesses it can buy and what price.
Additionally, the company’s printers cost around $250,000 per unit. If we look at its second-quarter results, it generated roughly $811,000 in sales, indicates it sold just three printers. For a company with such a massive market cap and hardly any sales revenue, the figure is puzzling.
The Bottom Line on NNDM Stock
NNDM stock had a decent run this year. However, the retail trading interest in the stock has faded away, as the focus is squarely on its top-line growth and outlook.
Nano Dimension has had it incredibly tough in boosting its organic sales. It lacks a clear vision and has therefore failed to scale its operations effectively. Moreover, it’s trading at a valuation that eclipses its total addressable market.
NNDM stock is overbought and a highly speculative bet at this stage.
On the date of publication, Muslim Farooque 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.