What happened
Shares of 3D printing company Desktop Metal (DM 0.84%) surged as much as 4% in early trading Monday before retreating to about a 1.8% gain as of 11 a.m. EST.
The company announced this morning that it has just won a "multimillion-dollar contract" from the U.S. Veterans Administration to produce compressed-foam products that can later be expanded to full size for use with patients.
So what
Think "bed in a box" as you read this story. Desktop Metal says it uses its ETEC Xtreme 8K DLP printing system to 3D-print its new FreeFoam product from photopolymer resins that are compressed in an oven and can later be expanded anywhere from two to seven times their original compressed size. Products to be made with this process will include orthopedic items like seat cushions and mattresses, and medical items.
The company says the reason for making them small and expandable is to save on shipping and storage costs of the items prior to use. Desktop Metal says that the initial award under this contract is $2 million, with the potential to grow to $7 million in size.
Now what
So the "multi" part in multimillion means a factor of 2 to 7. And that might explains why investors' reaction to this announcement, which was initially so enthusiastic, seems to be running out of steam as the day progresses. With the company already having $205 million in trailing annual sales, an increase of $2 million suggests that this FreeFoam contract could be worth less than a 1% bump in annual sales to Desktop Metal or 3.4% at best.
As of late morning, investors seemed to be taking a wait-and-see attitude on the news, crediting Desktop Metal for being worth somewhere between 1% and 3.4% more today than it was before the contract was announced. That sounds just about right to me.
