Ouch! What's Happening to 3-D Printing Stocks?

3-D printing stocks have plunged so far this week. Here's what investors need to know.

Jan 15, 2014 at 10:24PM

It's only Wednesday, but it seems safe to assume investors in 3-D printing stocks can't wait for this week to end.

It all started yesterday, when shares of Stratasys, Ltd. (NASDAQ:SSYS) plunged 10% after it provided weaker-than-expected 2014 earnings guidance. And while shares of 3D Systems Corporation (NYSE:DDD) were largely spared thanks to an initiation at "outperform" from RBC Capital yesterday, Stratasys did manage to drag fellow additive manufacturer ExOne Co. (NASDAQ:XONE) down nearly 6%.

Worse yet, ExOne fell another 10% this morning thanks to an after-the-bell press release, in which the company lowered its fourth-quarter 2013 revenue guidance.

Sure enough, despite the positive analyst note and the unveiling of a bevy of compelling new products at the 2014 Consumer Electronics Show last week, 3D Systems remained guilty by association and shares have fallen around 8% since Monday morning as of this writing.

But does all this craziness mean 3-D printing investors should be running for the hills?

In a word: nope.

Look past the headlines, Fools
To be sure, investors would be wise to dig a little deeper and consider the actual reasons behind the aforementioned guidance reductions.

Stratasys, for its part, claims both higher operating expenses and capital expenditures will put a damper on earnings going forward. However, note those expenses will be used to invest in Stratasys' R&D, sales, and marketing platforms. This, in turn, will ensure Stratasys stays at the forefront of the industry's technological curve while at the same time driving future market adoption.

In addition, Stratasys says, its core business margins will continue expanding in 2014, but overall should remain steady over 2013 thanks to the lower operating margins carried by its newly acquired, fast-growing MakerBot subsidiary. But we also need to remember MakerBot remains in its relatively early stages, so its numbers should improve over time as it sells more high-margin filament materials -- a delayed result of MakerBot's currently strong Replicator printer unit sales.

Then there's ExOne, which focuses exclusively on high-end industrial 3-D printers and warned that Q4 revenue will arrive in the range of $40 million to $42 million, or roughly 12% to 17% short of its previous guidance of $48 million. In ExOne's words, investors can blame the numbers primarily on "machine sales not yet completed for customers in Russia, India, Mexico, and France, some of which involve approval processes that were deferred into 2014."

The printers in question? Four S-Max units and one S-Print unit -- yep, five whole printers will be responsible for ExOne's $6 million to $8 million shortfall. At the same time, however, ExOne says none of these are actually lost sales. To the contrary, ExOne CEO Kent Rockwell insisted: "We have not lost a single order and expect these sales to be completed in the first half of 2014. [...] We believe that these machine sale delays are only due to timing and no other factor."

Foolish final thoughts
Long story short? There's no need to fear the demise of 3-D printing stocks solely based on these not-so-encouraging press releases.

But don't get me wrong: That's also not to say 3-D printing stocks look cheap by any traditional metric. In fact, they almost always look overpriced, so I still don't think investors should be backing up the truck at today's levels. But that still doesn't mean investors should be selling shares, either. At the very least, if you absolutely must be exposed to 3-D printing stocks, dollar-cost average your way in so drops like today don't hurt as badly.

If one thing's for sure, though, it's that by owning shares of these promising, high-growth businesses, you will experience volatility. So be sure to dig deeper when it happens and don't let emotion get the best of you.

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Fool contributor Steve Symington owns shares of 3D Systems. The Motley Fool recommends and owns shares of 3D Systems, ExOne, and Stratasysm and has options on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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