Desktop Metal (NYSE:DM) stock offers investors exposure to burgeoning niche markets as a pioneer in the additive manufacturing industry. Plus, DM stock is easily affordable for most people’s trading accounts.
Believe it or not, the additive manufacturing market is expected to reach $146 billion by 2030. Moreover, from 2019 to 2030, the additive manufacturing industry is predicted to expand at a compound annual growth rate (CAGR) of 25%.
I can’t blame anyone for wanting to get a piece of the action, but now isn’t the time to take a position in DM stock. There are reasons to believe in Desktop Metal, but there are also problems with the company.
Mainly, those problems have to do with Desktop Metal’s bottom line. On top of that, the share price has been on a bearish trajectory for quite a while – so, let’s talk about that now.
A Closer Look at DM Stock
As you may recall, Desktop Metal was introduced to the trading public in late 2020 after completing its merger with special purpose acquisition company (SPAC) Trine Acquisition.
Interestingly, DM stock started off 2021 with a quick spike from $16 to nearly $35. Is it possible that the Reddit short-squeeze mob was involved? I’ll let you decide that for yourself. What we do know for certain is that the Desktop Metal share price wasn’t destined to stay in the $30s for long.
DM stock has been in a bear market since February, and a key level was breached when the share price slid below $10 level during the summertime.
Could $5 be next? The stock is already trading a little below $6, so a sub-$5 share price could be in the cards.
If that happens, it would be a psychological blow to the bulls as DM stock would then be considered a penny stock, which can informally be defined as a stock that trades for less than $5 per share.
Major Advantages
Thus, on a technical basis, it’s difficult to recommend a position in Desktop Metal right now. I hate to say that, as the company has a lot going for it. Among Desktop Metal’s biggest advantages is its best-in-class portfolio of “AM 2.0” solutions.
By that, we mean the next generation of additive manufacturing products. Just in the 3D printing category alone, Desktop Metal is a fierce competitor.
Impressively, the company has 20 print platforms focused on end-use production. Additionally, Desktop Metal enables more than 250 differentiated materials, ranging from ceramics to composites to biofabrication materials and many more.
Another advantage is Desktop Metal’s large distribution network. This includes 200+ channel partners, more than 20 sales representatives and a market footprint in over 65 countries.
Going in the Wrong Direction
Given the company’s competitive advantages, you might be tempted to start accumulating DM stock shares today. Hold on, though. There’s a problem, and it may be a deal-breaker.
When we look at Desktop Metal’s third-quarter 2021 financial results, we’ll encounter a good-news, bad-news situation.
The good news is that Desktop Metal generated revenues of $25.4 million, up 34% quarter-over-quarter and a 907% year-over-year. That sounds terrific, right? Now, however, we must look at the company’s bottom-line results.
During 2021’s third quarter, Desktop Metal sustained a net earnings loss of nearly $66.9 million. That’s much worse than the already worrisome loss of $19.46 million from the year-ago quarter.
Moreover, during 2021’s first nine months, Desktop Metal had a net earnings loss of $169.17. In the same period from 2020, the loss was $65.03 million.
The Bottom Line
At the end of the day, Desktop Metal is a promising business in a fast-expanding niche industry. The company has its advantages, including a robust product portfolio, a vast distribution network and strong revenue generation.
Nevertheless, it’s difficult to recommend DM stock until the buyers show some conviction and the company moves towards profitability.
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.
