Here's Why 3D Systems Is Tanking
3D Systems shareholders were left shaking their heads today as their stock plummeted nearly 10% on heavy volume and no apparent negative news.
So what's dragging this additive manufacturing specialist down today?
The bigger they are...
First of all, as most 3D Systems investors are well aware, its beta of 2.11 proves volatility is par for the course for the rapidly growing company. Even after today's drop, however, its important to remember that 3D Systems has risen more than 30% over the past three months. What's more, the stock currently trades nearly 160% higher than its year-ago levels.
In addition, while investor excitement reached a fever pitch after 3D Systems enjoyed year-over-year revenue growth of 57% last quarter, sky-high valuations caused some of us to wonder whether shareholders were manufacturing their very own dot-com-esque bubble. All told, with 3D Systems set to announce earnings Monday, those concerns have helped our skittish market pull its shares down more than 17% over the past week alone.
With this in mind, it's also important to note that 3D Systems isn't the only 3-D printer falling today; both competitor Stratasys and newcomer ExOne also joined the pity party by dropping nearly 5% this morning. What's more, Stratasys and ExOne have followed 3D Systems down the tubes over the past month, falling 13% and 10%, respectively. Once again, the culprit appears to be wider valuation concerns for the 3-D printing industry as a whole.
To be sure, these concerns appear to be valid on the surface. Despite the industry's recent torrid growth, and the fact 3D Systems and Stratasys are solidly profitable, both companies currently trade at just under 80 times trailing earnings. Even still, hope remains that they could grow into their valuations as industry experts estimate the 3-D printing market could triple within the next five years.
What's more, just last month Motley Fool co-founder David Gardner reiterated the need for investors in the additive manufacturing space to maintain a long-term outlook, going so far as to compare 3-D printing to investing in the Internet in 1997: "Think about what the Internet has become over the last 20 years. It has absolutely become integral to the lives of billions of people on the planet." It stands to reason, then, if additive manufacturing could achieve even a fraction of the Internet's household utility over the long haul, today's investors would be handsomely rewarded.
What does that mean for 3D Systems shareholders now? Despite today's drop, nothing has changed the staggering long-term potential for the 3-D printing industry. If you can keep your wits about you and remain patient, its a safe bet today's volatility will barely register as a blip in the radar down the road.
More expert advice from The Motley Fool
3D Systems is at the leading edge of a disruptive technological revolution, with the broadest portfolio of 3-D printers in the industry. However, despite years of earnings growth, 3D Systems' share price has risen even faster, and today the company sports a dizzying valuation. To help investors decide whether the future of additive manufacturing is bright enough to justify the lofty price tag on the company's shares, The Motley Fool has compiled a premium research report on whether 3D Systems is a buy right now. In our report, we take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell, and receive a full year of analyst updates with the report. To start reading, simply click here now for instant access.
The article Here's Why 3D Systems Is Tanking originally appeared on Fool.com.Editor's note: To clarify the disclosure position outlined below, The Motley Fool owns shares of 3D Systems through both our Supernova and Pro real-money premium services. In addition to the shares it owns, our Pro premium service has written a "covered strangle" options position on 3D Systems, agreeing when the trade was set up to buy more shares at a lower price, or to sell existing shares at a higher price - while maintaining the ability to close either obligation any time. Finally, 3D Systems is a recommendation in Stock Advisor, which is not a real-money service.Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool owns shares of 3D Systems and Stratasys and has the following options: Short Jan 2014 $55 Calls on 3D Systems and Short Jan 2014 $30 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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