Actions of Office metal (NYSE: DM) fell 12.7% in February, according to data provided by S&P Global Market Intelligence. The new-age 3D printing company, which went public in December when it was acquired by SPAC Trine Acquisition, fell in February along with many other high-growth stocks.
Of course, February’s drop came after the stock rose sharply in January, amid market enthusiasm for PSPCs and news of another targeted acquisition. The current price is still 60% above levels before the initial merger in December.
There was no particularly relevant news from Desktop Metal in February. He completed the acquisition of EnvisionTEC, a Michigan-based 3D printing company, for $ 300 million. However, this acquisition had already been announced in mid-January.
More likely, Desktop Metal sold off heavily due to a rise in long term bond rates, along with many other young growth stocks. Desktop Metal has very promising technology, but only achieved $ 8.1 million in revenue in the first nine months of 2020, down 61% from the previous year, and recorded losses of $ 65.8 million operating as COVID-19 wreaked havoc on factory production and new technology adoption. Needless to say, profits are still a long way off and higher interest rates will greatly affect the valuations of these types of start-up companies.
Of course, not only was the 2020 results strongly affected by the COVID-19 pandemic, but that revenue was only made up of Desktop’s oldest system, Studio System. The company has three more technologies coming to market in late 2020 or 2021, which is where the real Desktop craze lies. These include the production system, the magazine system and the fiber.
Shop System and Fiber began commercial shipments at the end of 2020, and Production System is expected to start shipping in 2021. It should be noted that Production System promises a breakthrough in 3D printing technology, advertising speeds of up to 100 times faster than existing metal 3D printing technologies. . If this is done, it could bring 3D printing back to the same level as traditional manufacturing costs.
Until now, 3D printers have only really been able to deliver value in prototyping, not mass production. If Desktop can finally crack the code and bring 3D printing to mass production industrial environments, that could be a game-changer. While definitely speculative, Desktop is a business to watch, especially after this month’s sale.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.