NNDM - Nano Dimension Is Back In The Driver's Seat

2023-10-13 06:50:01 ET

Summary

• Nano Dimension is a pioneering company in 3D printing technology with a unique focus on electronics and has an opportunity to lead the charge in impending industry consolidation.
• Recent positive developments for the stock include the fall through of the Stratasys-Desktop Metal partnership discussions and rapidly growing revenues.
• Nano Dimension's unique valuation is justified by its first-to-market technological advantage, overall industry growth, and growing range of diverse applications.

Nano Dimension Is Again Looking Like An Interesting Investment

Nano Dimension Ltd. (NNDM) is a pioneering company in the realm of 3D printing technology, with a specific focus on microelectronics. Investing in Nano Dimension's stock presents a unique opportunity to be part of the disruptive force that is reshaping the way electronics are designed and manufactured. Since we last covered Nano Dimension the stock has remained fairly stagnant price wise. The biggest breakthrough is in the fall through of the potential deal between Stratasys (SSYS) and Desktop Metal (DM). This opens up a greater potential for NNDM to be a part of some form of speculative buyout to better utilize their large sum of cash on hand. In this article, we will delve deeper into the compelling reasons why considering an investment in Nano Dimension's stock might be a prudent decision following recent developments.

Nano Dimension has been making waves in the world of additive manufacturing and electronics. Recent developments underscore the company's commitment to innovation and growth:

1. Advanced 3D Printing Solutions: Nano Dimension has consistently unveiled advanced 3D printing solutions designed for the rapid prototyping and production of electronics. These solutions cater to a wide range of industries, including aerospace, defense, and healthcare. The group's latest development comes within the AI space with their new DeepCube learning technology.

2. Strategic Partnerships: The company has forged strategic partnerships with leading organizations in various sectors. These collaborations aim to leverage Nano Dimension's expertise in 3D printing and electronics to develop cutting-edge applications. The company started off with smaller high return acquisitions and has now begun targeting a larger partnership with Stratasys in recent months.

3. Product Expansion: Nano Dimension has expanded its product portfolio to include a broader range of 3D printing materials and equipment, focusing mainly on AME, micro AM, and AI applications ( Figure 1 ) . This unique diversification enhances its capabilities and market reach.

4. Financial Growth: The company has consistently reported revenue growth quarter after quarter and year after year, indicating increasing demand for its innovative 3D printing solutions. This growth trajectory is a positive indicator of its market relevance and future opportunities.

Figure 1. Nano Dimension's DragonFly IV is an industry leader in the AME (additively manufactured electronics) space

These recent developments not only underscore Nano Dimension's commitment to innovation but also highlight its potential to revolutionize the electronics industry through 3D printing technology, hallmarking the business as a clear competitor in the industry. Furthermore we believe a combination of business with Stratasys could unlock significant potential for value and well utilize the large sum of cash NNDM has on hand.

Current Valuation

Assessing Nano Dimension's valuation is difficult as their market cap far exceeds their revenue and earnings due to the large amount of cash on hand making traditional multipliers incomparable to normal averages. The best valuation metric for NNDM in our opinion is therefore price to book ratio. Nano Dimension trades at a discounted P/B ratio of 0.55x book value. This along with 70%+ YoY revenue growth put Nano Dimension in the driver seat from a valuation perspective if they can execute on unlocking value with their roughly $954 million in cash on hand. That is why we believe the best move in the 3D printing space would be an acquisition of Stratasys by Nano Dimension. This would allow SSYS the opportunity to improve on growth and extend their cash runway and give Nano Dimension the increased revenue they need to justify their premium valuation. Unless NNDM can find a good use for their large sum of cash on hand, their stock price will continue to struggle to find any ground.

Nano Dimension's pioneering role in the intersection of 3D printing and electronics places it in a unique position within the additive manufacturing industry. This technological advantage can justify a premium valuation, but they need the financial credibility of a larger entity to unlock this. The global 3D printing market is experiencing robust growth, and Nano Dimension is poised to benefit from this expansion. As industries increasingly adopt additive manufacturing for electronics production, the company's growth potential becomes more evident as more and more application arise. Investors should continue to watch the saga unfold as NNDM seeks out a strategic partner, but as time & in turn money continues to tick on, the potential for finding a good use dwindles. While Nano Dimension enjoys a pioneering status, the competitive landscape within the 3D printing and electronics space should be considered, industry consolidation would be beneficial to a number of names as the sector is still young and the number of players in the game outweighs the current total addressable market in our opinion.

Risks

Investing in Nano Dimension's stock comes with certain risks that should be carefully considered. Being at the forefront of 3D printing and electronics technology, Nano Dimension faces the risk of technological advancements by competitors that could challenge its market position. The use of additive manufacturing for electronics is relatively unheard of by most and will take a big player investing the time to learn how to make use of this at a commercial scale for the industry to really develop. Therefore, Market dynamics and the pace of adoption can impact the demand for Nano Dimension's solutions which is one of the main reasons why we see a collaborative partnership with a more established partner as advantageous for NNDM.

Economic downturns or uncertainties can impact industries and, consequently, demand for Nano Dimension's products. More specifically the recent events in Israel. Although NNDM is currently unaffected by these developments it should be monitored going forward as more news takes shape. NNDM has a significant amount of cash on hand and very little debt ($11 million) and we do not see cash being an issue for the foreseeable future for the company which is beneficial in high interest rate environments.

Indubitable Information

"In God we trust. All others must bring data" - Robert Hayden

Understanding Nano Dimension's history, innovations, and unique attributes can provide valuable insights into why it stands out in a competitive industry:

• Nano Dimension holds a 14% stake in competitor Stratasys
• The company has a strong management team, despite much criticism. Nano Dimension is led by a team of experienced entrepreneurs and industry veterans. The company's CEO, Yoav Stern, has over 25 years of experience in the AM industry.
• The company is addressing a large and growing market. The global market for AM is expected to grow from $27 billion in 2022 to $61 billion in 2027. The AM market for electronics is expected to grow even faster, from $0.5 billion in 2022 to $3.2 billion in 2027. NNDM seeks to be a leader in grabbing market share in this new blossoming industry.
• Nano Dimension's 3D printers can print circuits with features as small as 1 micron. This is equivalent to the width of a human hair.

In Conclusion

In summary, Nano Dimension represents a compelling investment opportunity for those looking to participate in the transformative world of additive manufacturing, particularly in the realm of electronics production. Recent developments underscore the company's commitment to innovation and growth, and its pioneering status in 3D printing technology positions it favorably within the industry. If NNDM can wisely utilize their cash on hand to acquire Stratasys or a similar name for a fair price we see strong upside potential to be unlocked. Without seeing details of some kind of deal it can be tough to predict how much upside the stock could hold, but with a low valuation a strong growth we see the current price of NNDM as a fair entry point into the additive manufacturing industry. Another way to play this investment would be to buy SSYS stock near lows in hopes of a $25 / share+ deal going through with the fallout of the Desktop Metal discussions.

However, like any investment, it's crucial for potential investors to assess the inherent risks and conduct thorough due diligence. Nano Dimension's valuation should be analyzed in the context of its technological leadership, diverse applications, and growth potential within the global 3D printing market. As the world continues to embrace additive manufacturing for electronics, Nano Dimension's innovative solutions and strategic collaborations place it at the forefront of this transformative industry. We believe an investment in NNDM or SSYS both present a high upside low downside opportunity at current prices.

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