What’s up everyone, Nano Dimension has been trending a lot lately across many social media
platforms regarding a potential stock squeeze.
And also on the back of popular demand from some viewers, I share with you my take on
Nano Dimensions position based on publicly available facts and information and not rumors
for you to decide whether to hold, buy or sell as my videos are not financial advise.
Is there really a 10, 15 or 20X opportunity here with Nano Dimension?
And for full transparency, I do hold Nano Dimension in my portfolio and have been bullish
on their long term outlook and so anything positive which comes out of this would be
very much welcomed.
So please drop me a comment below if you do hold Nano Dimension and let me know your take
on the company’s current position.
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That said let’s get on with it and talk about Nano Dimension Ltd (Nasdaq: NNDM) which
is now sitting at $3.68 with a market cap of $913m.
Whilst most of the high growth tech stocks have been bouncing strong in the last few
weeks, Nano Dimension has had a lacklustre performance in my view being only up by 5.4%
in the last month.
And this to me says a lot about the investor enthusiasm in the stock.
A year ago I was one of those very bullish on the potential on the stock based on their
outlook and management confidence in their activities and as you can see over that period,
the stock price has been going in the opposite direction; being down by over 57% in the last
year.
It seems to have troughed at the $3 price mark and beginning to show some momentum.
Nano Dimension have began to show signs of top line growth but is that sufficient to
turnaround the share price performance?
Lets find out..
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So here’s what’s new with Nano Dimension.
Nano Dimension, is mostly focused on 3D printing and provides intelligent machines for the
fabrication of AME (Additively Manufactured Electronics).
The company’s machines serve cross-industry needs, and focus on researching and developing
the industry of 3D-printed electronics.
And Nano's development of nanotechnology-based inks is what sets the company forward, where
they have been supplying their nano inks to other fields within the electronic industry
as well.
Nano actually had some positive early results updates for shareholders, but these announcements
haven’t been enough to stop its stock from getting caught up in the broader sell-off
for speculative stocks.
Here’s what they said.
Nano Dimension’s reported Approximate Revenues for the 4th Quarter and Full Year 2021 at
$7M and $10M respectively represented a 255% Increase Over Q4/2020 and 420% Increase Over
Q3/2021; 194% Increase Over Full Year 2020.
They announced a preview of their financial results for the fourth quarter ended December
31st, 2021 and full year ended December 31, 2021 stating that on a preliminary basis,
Nano Dimension reported unaudited approximated consolidated revenues of $7 million for the
fourth quarter ended December 31, 2021, and $10 million for the full year ended December
31, 2021.
And the unaudited consolidated cash and deposits balances as of the same date were approximately
$1,355,000,000.
This is where it gets really interesting.
We have been covering this stock for the past year and always making reference to their
cash balance position of over $1bn and it appears it has been on the rise, which has
caused a lot of shareholder frustration about the management’s ability to put this to
work.
And to put things into perspective, their cash balance at $1.3bn is more than the value
of the company at $913mn.
And so if a buyer offered a 30% premium to their current equity value for a buyout they
would get their money back.
So on one hand this make Nano an attractive target but on the other hand whats they appropriate
valuation.
Let’s build on the talks across the different platforms regarding Nano undergoing a short
squeeze and expand on this further.
Lets start with some theory briefly for the benefit of those new to the short squeeze
phenomenon.
So in essence, traders who short sell are motivated by a belief that, the price of a
stock will fall, and so shorting the stock allows them to profit from that decline in
price.
And so in practice, short selling involves borrowing shares from a broker, selling the
shares on the open market, and then buying the shares back in order to return them to
the broker.
So let’s take closer look at this for Nano Dimension, Granted this data is a few weeks
old but when you look at their number of shares on loan at 22.7m that’s about 8.9% of their
total float with 4.2 days to cover.
You can also see that for the best part of Q1, the percentage of floated shares has remained
relatively flat as well having dipped in Q4 2021.
Their days to cover has steadily increased as well from under 3 days in Q4 to over 4
days now.
Which is where it begins to get really interesting as the days to cover measures the expected
number of days to close out a company's outstanding shares that have been sold short, or in other
words it is the measure of a short interest in a stock.
So a high days-to-cover measurement can signal a potential short squeeze and it can be a
proxy for how bearish or bullish traders are about that company, which can aid future investment
decisions..
And this information can benefit a trader looking to make a quick profit by buying that
company's shares ahead of the anticipated event actually coming to fruition.
Data from the Fintel and the Nasdaq websites which update short interest more regularly
are now showing Nano to have a 9% of their float shorted with a short interest ratio
of 9 days to cover, which is double what we have just seen which is a significant indication
of a potential short squeeze pending.
So whether you want to swing this opportunity or are a long term holder you want to consider
this other aspect as the big question investors should be asking themselves right now is if
Can Nano Dimension Grow into Its Valuation and defy the odds?
The company now has a market capitalization of roughly $913 million, but its valuation
remains highly growth dependent.
We expect their revenue to come in at roughly 194% for the full year 2021 at $10m, which
gives it a price to sales ratio of 91X which is a lofty valuation..
Their sales seem to be on track to continue expanding at a rapid pace as we emerge from
the pandemic, but because Nano Dimension has also been relying on issuing new shares in
order to fund its operations and growth initiatives, and that has set up some risky dynamics at
a time when the market has become increasingly punishing about unprofitable companies.
The business has been expanding at a rapid rate and 3D printing for semiconductor manufacturing
is a young market, but the company's growth-dependent valuation, sets the stage for potentially
volatile stock swings.
Those taking the view that this company can grow into its valuation, focus on the growth
rate of this sector, where it is expected that the 3D industry could grow at a compounded
rate of around 26% annually which is absolutely impressive, and does provide a bullish outlook
for those on the higher end of the risk tolerance spectrum.
However, from a valuation standpoint, it's hard to make the numbers stack up right now.
Granted, the company does have a substantial cash position which does need to be factored
in by investors.
However, this company's current quarterly revenue of around $5 million just isn't going
to cut it much longer for those seeking meaningful quarter-over-quarter growth metrics.
And so until Nano Dimension provides a fundamental reason to buy in, many investors will remain
on the sidelines or better still go down the short route, which could be worsened, given
the risk-off sentiment we've seen in the current market climate.
So Nano Dimension stock is pretty difficult to value right now as the company is not yet
profitable and is in the early stages of its growth.
The company still has a long way to go to justify its current lofty multiple, but if
it can sustain it this rapid growth pace it could one day prove to be a good value for
investors, as they remain a rapidly growing company in a highly innovative field.
And so If it can sustain its current robust growth momentum, it might prove to be a decent
value at these levels.
Interestingly, Nano Dimension expects to release their financial results for the full year
2021 before the Nasdaq market opens on Thursday 31st March.
So you want to save that date in your diaries and that would be a turning point in the history
of the company given where we are right now.
So clearly some very very interesting and mindblowing prospects ahead for these penny
stocks but only consider getting in if the price is right for you and if you fully understand
the risks.
This video is not financial advice, a buy or a sell recommendation, but is meant to
bring some new and exciting penny stocks to your attention for you to do your own research..
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