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

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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Read/Post Comments (5) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 15, 2014, at 11:01 PM, cman663 wrote:

    So is it a good time to buy 3D stocks???

  • Report this Comment On January 16, 2014, at 10:16 AM, eyeknonothing wrote:

    I'm not what you would call a seasoned investor, but just think of all the possibilities for 3D. It's a gamble, but I think DDD is going to go through the roof and I put my money where my mouth is.

  • Report this Comment On January 16, 2014, at 11:13 AM, dtor wrote:

    If I may offer an opinion based on nothing but my own interpretation of my own research and own individual experience: many investors have not informed themselves about AM and tend to view "3D printing" companies in the same light as the .comS of yesteryear.

    <alert type=soapbox optional=yes>

    Those cute little plastic figurines printed at various CES booths this year notwithstanding, AM is very real and US companies are [currently] in the lead. "Based on research by Wohlers Associates, in Fort Collins, Colo., the U.S. has a commanding lead in global AM capacity, with 38 percent of all industrial installations. Japan is a distant second, with 9.7 percent, followed by Germany (9.4 percent) and China (8.7 percent). Wohlers Associates reports that 30 companies worldwide, including 16 in Europe, seven in China, and five in the U.S., sell industrial AM systems."

    Ok, "Tea, Earl Grey, hot." probably won't show up at CES for awhile, but...


    FWIW, check out the National Additive Manufacturing Innovation Institute:

  • Report this Comment On January 16, 2014, at 1:16 PM, TMFSymington wrote:

    @cman663 and @eyeknonothing: I can't provide individual investment advice, but, as I suggested above, I'm personally taking a dollar-cost-averaging approach at building my positions in 3-D printing stocks and think investors would be wise to do the same.

    @dtor, Good stuff...FWIW, you have no idea how close I was to using "Tea, Earl Grey, Hot" as a subhead when I wrote this article last week:

    Thanks for reading and Fool on!

    Steve (@TMFSymington)

  • Report this Comment On January 17, 2014, at 8:43 AM, insidertruth wrote:

    As a 30 years vet. in the Tool and Die trade. I cannot explain to all of you how much Money and Time these machines save the Industries that are smart enough to invest in there purchase. I can tell you this... These are going to put many future tool and Diemaker opening to rest. What once took months and possibly years to do to come up with prototype parts can now be done in days. Amazing to say the least. I would start with a 100 lbs block of steel and machine on it for days and possibly weeks and end up with a finished part that may weight 9-10 lbs. total waste. 3D printing lets you use only the material you need as you built the block or part basically backwards. Take it from someone who could lose their job over this technology, it is the future, and I am investing in it for my future. (tool and diemaker CHRYSLER LLC. 30 years veteran).

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