The Next Time Nano Dimension Stock Soars, it Won’t Be Due to ‘Meme Stock Mania’

Reddit traders tried to turn it into a short-squeeze play last month. But in the past few weeks, shares in Nano Dimension (NASDAQ:NNDM) stock have been pulling back. Since June 28, when the 3D printing play traded for around $9 per share, it has tumbled by around 28%.

Some may believe there’s still hope for the much-hyped short-squeeze. Yet, as of now, much points to this not happening. First off, short interest doesn’t run that high. As of June 30, only 9.6% of its outstanding float has been shorted. Second, a declining short volume ratio (shares sold short divided by total volume) suggests the so-called “smart money” short sellers aren’t upping their bets against this “meme stock.”

Third, high short interest isn’t the only ingredient you need to create a squeeze on par with the respective AMC Entertainment (NYSE:AMC) or GameStop (NYSE:GME) squeezes. You need high enthusiasm from retail traders, willing to dive in en-masse, with little concern with the fundamentals. Yet, take a look at a tracking of chatter on Reddit’s r/wallstreetbets subreddit, and as of this writing, threads about have fallen back towards zero.

Putting it simply, a short squeeze isn’t around the corner. Its growth down the road could renew enthusiasm for it. But for now, don’t expect it to set the world on fire. That being said, it may still be worth it, if you have patience to wait for it to take off.

NNDM Stock and The Dwindling Retail Investor Enthusiasm for It

As Wall Street commentator Jim Cramer put it during the “lightning round” segment of Mad Money on July 6, when it comes to this stock, “this one is played out.” That is, the buzz seen with Nano Dimension shares during last month’s second wave of “meme stock madness” has come and gone.

Interestingly, unlike the second waves with other popular “meme stocks,” such as the top ones mentioned above, along with names like Blackberry (NYSE:BB), the one here with NNDM stock was quite muted. Names like Blackberry made parabolic moves during this second round of madness. In contrast, this stock saw just a moderate lift, from around $6.50, to just under $9 per share.

The takeaway? Given its lower level of short-interest, it makes sense why a more epic rally didn’t happen. Also, it’s questionable potential as a short squeeze stock, coupled with the dwindling discussion about it, points to another upward move not happening anytime soon. Especially as many who dived into last month are still cashing out.

Again, the growth of its underlying business may mean someday the stock gets back to double-digit price levels. It may take time. Yet, you may not have to worry about additional big declines.

High Cash Position May Mean Minimal Downside From Here

As a “story stock,” the current valuation of NNDM stock isn’t based on its current fundamentals. Instead, it’s based on it scaling into a major provider of 3D-printed electronic components, to end users in industries like automotive, defense, and electronics.

This is why growth investing gurus like Ark Invest’s Cathie Wood have been bullish on the stock. In exchange for high growth potential, investors like Wood have been willing to pay up. That is, value the stock at a level that gives it a $1.67 billion market capitalization. While, at the same time, the company’s revenue stands at just a few million per year.

This stock may seem richly-priced, with its triple-digit price-to-sales (P/S) ratio. But it’s important to compare its market capitalization to its very liquid balance sheet. Subtract its $1.4 billion in cash and short-term investments, and you get an enterprise value of around $280 million.

Still high compared to its current results, but reasonable compared to the potential for its business to scale up substantially in the years ahead. Not only that, this high cash position could signal that further downside from here may be minimal. Assuming investors will consider it a bargain if it falls below its book value of around $5.73 per share? A continued bailing out of it by Reddit traders may mean possible further downside is around 15%.

Squeeze Potential Limited, But Still Worth a Look

Sure, considering it a low-downside stock based on its cash position may be ignoring the risk of cash burn. However, given its posting losses of just $10 million-$20 million per quarter, it’s going to be a while before this war chest really starts to dwindle. This still means further declines could be minimal than the ones seen in recent weeks.

Only time will tell whether it parlays its 3D printing technology into a business worth many times what it trades for today. While its short-squeeze catalyst is off the table, NNDM stock may still be worth it for growth investors with time horizons that stretch years rather than months.

On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.