- Desktop Metal (DM) stock is moving quickly on the path to lower prices.
- The company’s bottom-line results came in worse than expected.
- Investors should simply choose to avoid investing in Desktop Metal.
Based in Burlington, Massachusetts, Desktop Metal (NYSE:DM) is known as an additive manufacturing company, but is sometimes also considered a 3D printing business. This might sound promising if you see a future for the 3D printing industry. Yet, you might get caught in a trap if you buy DM stock now.
Based on its price action, this stock fits the definition of a “falling rock.” Do you really want to be a hero and catch it? Think carefully, and check Desktop Metal’s financials, before making a hasty decision.
After all, when a company is digging itself into a deeper fiscal hole, cheap share prices shouldn’t convince you to be a buyer. In the final analysis, you’ll likely want to find another technology company to invest in, besides Desktop Metal.
What’s Happening With DM Stock?
As the old saying goes, the trend is definitely your friend. DM stock is quite unfriendly, though, as it has fallen from a 52-week high of $15.48 to around $2 recently.
How much worse can it get? Every stock’s floor is zero, but even a seemingly cheap stock could conceivably get much cheaper.
Besides, if you read between the lines, you may discern that Desktop Metal isn’t in a great financial position. For instance, the company recently priced an offering of $100,000,000 worth of 6% convertible senior notes, due 2027.
Those are debt notes, plain and simple. They might provide Desktop Metal with a quick capital infusion, but it’s not free money. The company will have to pay it all back, plus 6% annualized interest.
A Negative Earnings Surprise
So, Desktop Metal had better start showing a profit soon, in order to show that it’s able to repay this massive debt load. However, the company’s financials don’t suggest that this will happen anytime soon.
As they say, the numbers don’t lie. During 2022’s first quarter, Desktop Metal incurred an earnings loss of 14 cents per share. That’s bad news when the share price is around $2.
Furthermore, the analysts’ consensus estimate was for a loss of 12 cents per share, so Desktop Metal’s result was a miss. It’s also worth noting that the company posted an earnings gain of 3 cents per share a year ago. Thus, the company is definitely headed in the wrong direction.
What You Can Do Now
Desktop Metal isn’t a profitable company, and its shares have been losing value rapidly. It’s not your responsibility to try to be a hero and catch this falling rock.
It’s perfectly fine if you’re generally bullish on 3D printing and additive manufacturing. The best policy, though, is to find something better to invest in than DM stock.
On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article.