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Why Desktop Metal Stock Dropped 12% Today, Then Rebounded

By Rich Smith – May 18, 2021 at 11:52AM

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Earnings were terrible, but sales estimates actually look pretty strong.

What happened

The stock of Desktop Metal (DM 4.12%) dropped as much as 12% in early trading this morning after the 3D-printing company reported first-quarter financial results last night. But the stock quickly recovered most of its losses and was down only 5.7% as of 10 a.m. EDT on Tuesday.

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Image source: Getty Images.

So what

Analysts had forecast a money-losing first quarter for Desktop Metal, with $0.12 per share in losses on sales of $9.4 million. The actual results were mixed: a loss of $0.25 per share, on booked sales of $11.3 million.  

In fact, Desktop's sales surged 35% sequentially from the prior quarter, and more than tripled year over year when compared to first-quarter 2020 results. Although losses grew as well (worsening from $0.14 in the year-ago quarter), that seems to have been more a consequence of the company's IPO driving up general and administrative costs, and the noncash negative change in fair value of warrant liability also associated with the IPO.  

Now what

As for how the business itself is performing, Desktop Metals said it attracted more customers in the first quarter of 2021 than in all of 2020, which CEO Ric Fulop said illustrates "strong organic momentum." In that vein, Desktop Metal reiterated its guidance for over $100 million in revenue this year, accelerating toward an annual revenue run-rate of $160 million.

That's significantly more than the $95 million in sales that Wall Street had been projecting this year, and the $160 million run-rate coming out of 2021 appears to put the company more securely on track to hit the $187 million sales target the Street has set for it in 2022. So after initially panicking this morning over the size of Desktop Metal's first-quarter loss, investors taking a longer-term view appear to have moderated their selling as the day wore on.  

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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