The next time NNDM’s stock skyrockets, it won’t be because of the “meme stock mania”
Reddit traders tried to turn it into a short squeeze game last month. But in recent weeks, the actions of Nano dimension (NASDAQ:NNDM) stocks fell. Since June 28, when the 3D printing game was trading at around $ 9 a share, it has fallen by around 28%.
Some may believe there is still hope for the high-profile short-squeeze. Yet, as of now, a lot of points indicate that this is not happening. First of all, the short term interest is not that high. As of June 30, only 9.6% of its outstanding outstanding had been short-circuited. Second, a falling short volume ratio (stocks sold short divided by total volume) suggests that so-called âsmart moneyâ short sellers are not increasing their bets against this âmeme stockâ.
Third, high short-term interest is not the only ingredient you need to create a crunch on par with the respective AMC Entertainment (NYSE:AMC) or GameStop (NYSE:GME) tight. You need a lot of enthusiasm from retail traders, ready to dive in en masse, regardless of the fundamentals. Still, take a look at a follow-up to discussions on Reddit. r / wallstreetbets subreddit, and at the time of this writing, discussions about have dropped to zero.
Simply put, a short push is not around the corner. Her growth on the road could rekindle enthusiasm for her. But for now, don’t expect him to set the world on fire. That being said, it may still be worth it, if you have the patience to wait for it to take off.
NNDM stock and the waning enthusiasm of retail investors for it
As Wall Street commentator Jim Cramer put it during the ‘flash’ segment of Crazy money July 6, when it comes to this stock, “this one is played”. That is, the buzz seen with Nano Dimension’s actions during last month’s second wave of âmeme stock madnessâ has come and gone.
Interestingly, unlike second waves with other popular “memes actions”, such as the first ones mentioned above, as well as names like Blackberry (NYSE:BB), the one here with the NNDM stock was pretty quiet. Names like Blackberry made parabolic moves during this second round of madness. In contrast, this stock has seen only a moderate increase, from around $ 6.50 to just under $ 9 per share.
Take-out? Given its lower level of short-term interest, it makes sense that a more epic rally hasn’t happened. Also, its potential is questionable, as short-term action coupled with less talk about it indicates that another upward movement is not coming anytime soon. Especially since many of those who dived last month are still cashing.
Again, the growth of its underlying business could one day mean the stock will return to double-digit price levels. It may take a long time. Still, you might not have to worry about any further big drops.
A high cash position can mean minimal inconvenience from here
As a âhistorical shareâ, the current valuation of the NNDM share is not based on its current fundamentals. Instead, it is based on its transformation into a major supplier of 3D printed electronic components, for end users in industries such as automotive, defense and electronics.
This is why growth investing gurus like Ark Invest Cathie Wood was bullish on the title. In return for high growth potential, investors like Wood have been willing to pay. In other words, value the stock at a level that gives it a market cap of $ 1.67 billion. While, at the same time, the turnover of the company is only a few million per year.
This stock may seem rich in price, with its triple-digit price-to-sell (P / S) ratio. But it’s important to compare your market capitalization to your very liquid balance sheet. Subtract his $ 1.4 billion in cash and short-term investments and you get an enterprise value of around $ 280 million.
Still high in relation to its current results, but reasonable in relation to the potential of its business to grow substantially in the years to come. Not only that, this high cash position could signal that further declines from here could be minimal. Assuming investors consider it a good deal if it drops below its book value of around $ 5.73 per share? A continued bailout by traders on Reddit could mean an additional downside is around 15%.
Limited potential, but still worth a look
Of course, considering this to be a low bearish stock based on its cash position can ignore the risk of cash consumption. However, given its losses of only $ 10-20 million per quarter, it will be some time before this war chest really starts to decline. This still means that further declines could be minimal compared to those seen in recent weeks.
Only time will tell if it turns its 3D printing technology into a business that is worth many times what it trades for today. While its short-term catalyst is not on the table, NNDM stock may still be worth it for growth investors with time horizons that span years rather than months.
At the date of publication, Thomas Niel did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Thomas Niel, collaborator of InvestorPlace.com, has been writing unique stock analysis for web publications since 2016.