The Israel-based additive electronics provider Nano Dimension Ltd. (NNDM) is popular for its flagship DragonFly lights-out digital manufacturing system. The stock has lost 48.9% over the past month and 16.4% year-to-date, however.
The company suffered a severe setback amid the COVID-19 pandemic as several of its production units had to be closed. And the demand for NNDM’s products and services — such as its 3D printing technology used in printing electronic devices — declined significantly.
The company has been offering several other direct solutions to stay afloat amid the pandemic and fund its operations. However, the stock has plunged further of late as investors began rotating away from riskier growth stocks to high-yielding Treasury bonds. Suffice to say, amid stiff competition in the 3D printing technology space, NNDM’s near-term prospects look bleak.
Here’s what we think could shape NNDM’s performance in the coming months:
Selling Shares to Stay Afloat
The company closed an offering of 39,100,000 of its American Depositary Shares (ADSs) at $12.80 per ADS on February 18, 2021. This generated roughly $500 million in proceeds. NNDM plans to use the proceeds for working capital, other general corporate purposes, and to pursue strategic opportunities, including possible business combination transactions.
NNDM generated roughly $332.5 million from a direct offering it closed on January 19, 2021 and roughly $250 million from an offering it closed on December 30, 2020. And on December 9, the company generated roughly $180 million from another direct offering.
Weak Financials
NNDM’s top line declined significantly to $438,000 for the third quarter, ended September 30, 2020, as compared to $2.24 million for the third quarter of 2019. NNDM’s gross loss was t $56,000 for the third quarter of 2020, and its operating loss came in at $19.89 million. The company’s total comprehensive loss also widened to $20.72 million for the quarter.
Poor Profitability
In terms of its trailing-12-month gross profit margin, NNDM’s 40.7% is lower than the industry average 48%. Also, the stock has a negative value for its trailing-12-month levered free cash flow margin compared to the industry average 11.9%. NNDM has negative values for it trailing-12-month return on common equity and trailing-12-month return on total assets compared to the industry averages of 6.4% and 2.8%, respectively.
Consensus Price Target Indicates Downside
Wall Street analysts expect the stock to hit $6 in the near term, which indicates a potential decline of 37.6%.
Unfavorable POWR Ratings
NNDM has an overall rating of F, which equates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
Our proprietary rating system also evaluates each stock based on eight different categories. NNDM has an F grade for Quality also, which is in sync with its lower-than-industry profitability ratios. The stock also has a grade of F for Stability.
We have also given NNDM grades for Growth, Value, Momentum and Sentiment. Get all NNDM’s ratings here.
Of 50 stocks in the B-rated Technology – Hardware industry, NNDM is ranked #49.
Better than NNDM: Click here to access eighteen top-rated stocks in the same industry.
Bottom Line
The global 3D printing market reached a value of $13.20 billion in 2020 and is expected to continue growing. But NNDM is not strategically positioned to gain from industry tailwinds in the near term. Based on the company’s weak financials, we think it wise to avoid the stock for now. Moreover, on February 9, Yoav Stern, the President & CEO of NNDM said, “I stated publicly that revenue in 2020 could be close to zero”.
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NNDM shares were trading at $8.65 per share on Monday morning, up $1.04 (+13.67%). Year-to-date, NNDM has declined -4.95%, versus a 3.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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