Burlington, Massachusetts-based Desktop Metal (NYSE:DM) could be described as an additive manufacturing company, or alternatively as a 3D printing business. Without a doubt, folks who bought and held DM stock during the past year were hoping to get prime exposure to those high-conviction niche markets.
Yet the Desktop Metal share price has only declined since February of 2021. It’s an unexpected result, as the additive manufacturing market is expected to reach $146 billion by 2030.
How can we account for the dreadful under-performance of DM stock, then? And is it time for enterprising investors to go on a bottom-fishing expedition with Desktop Metal?
At the end of the day, we always must keep in mind the difference between price and value (to borrow a phrase from Warren Buffett). Desktop Metal’s value proposition, as we’ll see, is murky. The bullish and bearish arguments both hold weight.
A Closer Look at DM Stock
Just to recap, Desktop Metal was introduced to the trading public in late 2020 after completing its merger with special purpose acquisition company (SPAC) Trine Acquisition.
As you may recall, there was a hype phase in early 2021. As Reddit traders and retail investors enthusiastically bought low-priced stocks, it appears that DM stock got caught up in the hype phase.
Ultimately, Desktop Metal ended up being a poster child of the 2021 pop-and-drop cycle. The share price topped out near $35 in early February, and it was all downhill from there.
Fast-forward to early 2022, and DM stock investors still can’t catch a break. Trading at $4 and change, it could informally be classified as a penny stock, or a stock that represents a small company and trades for less than $5 per share.
When a stock just keeps going down, it’s difficult to identify any meaningful support levels. This makes technical analysis much more challenging and frustrating.
At the very least, the shareholders will want to see DM stock get above $5 and stay there. The next battle lines could then be drawn at $10 and $12.
A Milestone Order
Don’t get me wrong — it’s not as if Desktop Metal is completely falling apart. After all, the company is still capable of making sales and generating revenue.
Indeed, one particular press release should offer the stockholders a glimmer of hope. Reportedly, Desktop Metal recently received an order for binder jet additive manufacturing systems from a major German car maker.
Apparently, these systems will be used in the mass production of metal automotive powertrain components. This order, according to Desktop Metal, is valued at $7.9 million.
The company’s founder and CEO, Ric Fulop, maintained that this “milestone order is evidence of the performance and economics that make our binder jetting solutions the most advanced in the world.”
Revenue Growth Isn’t Enough
It would be nice to know the name of the major German car maker involved in that purchase order. Still, DM stock holders should be glad to hear about any positive developments.
There’s also good news to report on the financial front. During 2021’s third quarter, Desktop Metal generated $25,438,000 in revenue, easily outdoing the $2,527,000 generated during the year-earlier quarter.
Here’s where the fiscal picture gets darker, however. It appears that Desktop Metal hasn’t been particularly successful in turning its revenue into profits.
As it turns out, Desktop Metal incurred a net earnings loss of $66,879,000 in Q3 of 2021. That’s substantially worse than the $19,457,000 loss from the prior-year quarter.
In other words, Desktop Metal’s revenue growth might be impressive, but it’s not enough to cover the company’s expenditures — not even close.
The Bottom Line on DM Stock
There’s an argument to be made that the additive manufacturing industry is expanding rapidly. However, this alone isn’t sufficient to justify a long position in DM stock.
Desktop Metal’s stakeholders should want to see the company working diligently toward a more positive financial profile. The company’s lack of profits is a major concern, or at least it ought to be.
Besides, there are no support levels to be found with DM stock. As long as the momentum is to the downside, I can’t recommend trying to be a hero and buying the stock now.
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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.