What happened
Shares of 3D printer makerDesktop Metal(NYSE: DM) surged 26.3% through 12:30 p.m. ET on Thursday after beating analyst sales projections for the fiscal fourth quarter.
Its financial report, which came out after close of trading Wednesday, showed that the company generated $60.6 million in revenue in the fourth quarter, while Wall Street only expected $54.4 million. Investors seem to be taking the outperformance as great news. But how great was it, exactly?
So what
Desktop beat on sales, but its year-over-year growth for the quarter was actually less than 7%. For all of 2022, sales grew 86%, so in fact, the fourth quarter represented a pretty steep slowdown in growth.
At the same time, the company earned no profit on any of its sales growth. Although gross profit margins improved in the year's final quarter, for the full year, margins declined from 16.3% to just 7.2% -- a drop of 910 basis points. And on the bottom line, Desktop lost a lot of money: more than $740 million for the year, and more than $312 million in the quarter alone.
Now what
Nor do things seem likely to improve much in the immediate future. Giving new guidance for 2023, Desktop Metal predicted that sales might grow to as much as $260 million, up 24% year over year, or to as little as $210 million -- up just 0.5%.
At the midpoint, that works out to a full-year revenue projection of about $235 million, or 12.4% growth, which would be quite a comedown from 2022. It's also far less than the Wall Street consensus for almost $260 million in sales this year. So the only way that Desktop Metal can conceivably meet Wall Street's expectations is to absolutely max out its guidance this year.
That seems unlikely, and Desktop Metal's share price gains today will not last.
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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.
