metal desktop (New York Stock Exchange:DMHe picked the wrong time to get a bad quarter. The 3D printing company lost nearly $67 million, or 26 cents per share, on revenue of $25.4 million during the third quarter. This was much worse than expected, with analysts expecting a loss of 9 cents a share on revenue of $27.1 million. DM’s stock is down about 43% since the November 15 report and down more than 77% over the past year.
Even if the company did not abandon the mass production system, the investors did. Shareholder lawyers line up to sue the company for misleading them. Desktop Metal, which is trading at less than $5 a share, is called a penny share.
DM exchange investors get their hopes up with a knock
I’ve been tracking 3D-printing stocks for nearly a decade, ever since Bre Pettis tried to make the MakerBot Replicator a consumer product after early 3D-printing patents expired. This effort has failed, as have many others.
What is now called additive manufacturing is an industrial market. driven by 3D Systems (New York Stock Exchange:DDD), based in the Charlotte suburb of Rock Hill, while DM’s stock has been falling last year, 3D Systems’ stock has more than doubled.
Desktop Metal was founded in 2015. It went public in December 2020 through the merger of a special purpose acquisition firm with SPAC called Trine Acquisition. CEO Ric Fulop is a serial entrepreneur best known for A123 Systems, which manufactures car batteries.
With an expected valuation of $2.5 billion approaching its public debut, Desktop Metal was what was known as a unicorn. And like many other hot stocks, it drifted into a tech trading frenzy in early 2021, with stocks hitting a high of nearly $35 in February.
Since then, this has been a painful path for DM stock investors. Insiders have dumped the stock and DM’s stock remains 87% below its all-time high less than a year ago.
I look ahead
Cloud and software startups find it easy to scale because the cloud provides the required infrastructure at a low cost. Companies like Desktop Metal have to make sales and then figure out how to scale manufacturing at a profit.
This has proven difficult. The history of 3D printing, or additive manufacturing, is full of hype, hope, and disappointment.
There have been successes, such as in the medical market, where the exact tolerance of the operation can lead to a reliable knee or artificial tooth. General Electric (New York Stock Exchange:Give) has also used 3D printing of jet engines and wind turbines.
Desktop Metal uses technology for metals such as the fused deposition modeling (FDM) process used with plastics by Pettis’ MakerBot. It is sometimes compared to inkjet printing. For mass production, the process is called mono jetting, spraying a bonding agent onto a metal powder and incorporating each layer by pressing. The company also offers its own prototyping program, called Live Parts.
Bottom line on DM stock
Desktop Metal has taken advantage of the SPAC boom to raise a lot of money. An ethicist might say it shouldn’t have been made public. An entrepreneur might say that when you open a financing window, you jump through it.
Desktop Metal used this money to purchase eight other small businesses in its space for the most cash transactions. Investors were disappointed, who saw this as a profit strategy rather than a growth strategy. However, Desktop Metal’s biggest deal, the purchase of ExOne for $191.4 million in cash and stock completed in November, will double the company’s revenue base.
The field of 3D printing is growing, but it is a game that requires patience. If you’re not willing to hold the DM’s shares for at least five years, it’s best to stay away.
At the date of publication, Dana Blankenhorn has not held any positions at any of the companies mentioned in this story. The opinions expressed in this article are those of the author, and are subject to InvestorPlace.com Posting Guidelines.
Dana Blankenhorn He has been working as a financial journalist since 1978. His most recent publication is The Big Bang of Technology: Yesterday, Today, and Tomorrow with Moore’s Law, articles about technology available on the Amazon Kindle Store. Follow him on Twitter at Tweet embed.