Desktop Metal, Inc.

Desktop Metal, Inc. (DM) Details

Desktop Metal, Inc. (NYSE: DM) was formerly known as Trine Acquisition Corp. and is engaged in developing additive manufacturing technologies for end-use parts. The company also offers metal 3D printing technology.

Trine Acquisition Corp completed the business combination with Desktop Metal Inc and began trading as a combined entity on the New York Stock Exchange under the ticker symbol "DM" from 10 December 2020. Therefore, the earlier given recommendation on the delisted entity-Trine Acquisition Corp was closed at the closing price on the last trading day i.e., 9 December 2020 at $24.77, as per data from the secondary sources.

DM Rides in Acquisition Synergies from Aerosint Buyout:

• On July 2, 2021, the company announced that it has bought Aerosint for an undisclosed amount.
• The acquisition is in line with the company’s strategy to retain differentiated print technologies that facilitate an escalating set of AM 2.0 applications at scale.
• Further, Aerosint’s core technology and related powder processing systems will offer several advantages to the wide-ranging adoption of AM solutions.

DM Adds PhonoGraft™ Platform to ITS Technology Portfolio: On July 7, 2021, DM informed the market that it has added the PhonoGraft™ platform to its technology portfolio. PhonoGraft technology used for repairing damaged eardrums, its minimal invasive and reduce the procedure time for patients and hence aids in hearing.

Key Highlights from 1QFY21 Results:

• Increase in Revenues: During 1QFY21, the company’s revenues came in at $11.3 million, depicting a rise of 234% year over year, and 35% from the previous quarter, owing to the expansion in materials portfolio, accelerated customer adoption, received FDA 510(k) clearance for Flexcera Base, and acquisition synergies from Adaptive3D buyout.
• Rise in Non-GAAP Gross Profits: In 1QFY21, the company’s non-GAAP gross profit stood at $0.6 million, depicting an improvement of $3.3 million from the year-ago period.
• Increase in Net Loss: In 1QFY21, net loss increased to $59.1 million, up from a loss of $21.8 million reported in the year-ago period, owing to an one-time item of warrant liability of $56.6 million.

Revenue Highlights; Source: Analysis by Kalkine Group

Key Risks:

• Change in Customer’s Preferences: The company is exposed to the risk of rapid technology changes with changing customer preferences.
• COVID-19 Led Uncertainties: The company is also exposed to risks associated with general global economic and market conditions.
• Stiff Competition in the additive manufacturing industry and integration risk remain potential headwinds.

Outlook: For FY21, the company expects more than $100 million of revenue, exiting the year with an annualized revenue run rate of $160 million. Adjusted EBITDA loss is expected to be in the range of $60-$70 million for FY21. 

  Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: Over the last three months, the stock went down by ~29.1%. The stock made a 52-week low and high of $9.93 and $34.94, respectively. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of an upside of high single-digit (in percentage terms). We believe that the company can trade at a slight discount as compared to its peer’s average considering changes in customer preferences, COVID-19 led headwinds, and increasing losses. For the purpose, we have taken peers like Hyliion Holdings Corp (NYSE: HYLN), Ouster Inc (NYSE: OUST), Cognex Corp. (NASDAQ: CGNX), to name a few.

Considering the increase in top-line in 1QFY21, acquisition synergies, robust product adoption, decent outlook, current trading levels, valuation and expected 2QFY21 results on 10 August 2021, we give a “Hold” recommendation on the stock at the closing price of $9.8, down by ~3.92% on 13 July 2021.  

DM Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.