On Monday, Desktop Metal Inc. (NYSE:DM) experienced a change in stock rating, as an analyst from Cantor Fitzgerald downgraded the company from Overweight to Neutral. Accompanying the rating adjustment is a revised price target, now set at $5.50, a significant decrease from the previous $12.50 target.
The adjustment follows the anticipation of Desktop Metal's impending merger with Nano Dimension (NASDAQ:NNDM), which the analyst believes is highly probable. The new price target represents a modest 5% increase over the current trading price of Desktop Metal shares. This expectation has led to the reevaluation of the stock's investment rating to Neutral.
The analyst's rationale behind the new price target of $5.50 is based on an enterprise value to sales (EV/Sales) multiple of 1.0x, pegged to the firm's 2025 sales projection of $220.4 million. This metric is used to gauge the company's valuation in relation to its sales figures, providing a basis for the new target price.
Desktop Metal's stock adjustment reflects the market's reaction to the merger news and the anticipated limited upside to the share price post-merger. The company's shares are now expected to hover around the transaction price outlined in the merger details.
The revised price target and downgrade come as the financial community assesses the implications of the merger on Desktop Metal's future performance and market position. Investors and market watchers will be closely monitoring the progress of the merger and its impact on the company's financial health and stock performance.
In other recent news, Desktop Metal has seen significant developments. The company has implemented a 1-for-10 reverse stock split of its Class A common shares to comply with the New York Stock Exchange's minimum bid price requirement.
This strategic move has resulted in Cantor Fitzgerald raising its price target for Desktop Metal from $1.25 to $12.50, retaining its Overweight rating on the company's stock.
The reverse stock split, approved by Desktop Metal's Board of Directors, is expected to increase the company's share price and reduce the number of its shares traded on the market.
This action is in response to the company's common stock price falling below $1.00 over a 30-day trading period, leading to non-compliance with NYSE's listing standards.
In financial updates, Desktop Metal reported a slight decrease in its revenue for the first quarter of 2024, amounting to $40.6 million. However, recurring revenue reached a record 43% of total revenue, indicating strong product utilization. The company also managed to reduce its operating expenses for eight consecutive quarters and improved its adjusted gross margin for nine consecutive quarters.
In terms of future plans, Desktop Metal aims to expand its sales force by adding 30 new sales representatives. The company is also exploring strategic alternatives for its photopolymer technologies.
For 2024, Desktop Metal anticipates generating revenue between $175 million and $215 million and expects to achieve positive adjusted EBITDA in the second half of the year.
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