Why 3D Systems Corporation Stock Dropped More Than 5%, While Arcam AB (ADR) Stock Rose Nearly 8% Today

Last week's volatility in among the 3-D printing stocks continued when the market opened the trading week on Tuesday.

Jan 21, 2014 at 10:16PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

While volatility is par for the course in 3-D printing stock land, there was more action than is typical among this group today. Shares of industry juggernaut 3D Systems (NYSE:DDD) ended the trading down 5.4% at $85.63, while those of Sweden-based metals 3-D printing company Arcam were in the green 7.8% at $39.3 when the bell rang.

Ratings flip-flops among the industry leaders
High-flyer 3D Systems' drop was due to a rating downgrade to "neutral" from "outperform" by Credit Suisse. The reason cited for this action was valuation, with Credit Suisse stating that 3D Systems has become too richly valued relative to its main peer and competitor Stratasys. Credit Suisse maintained its price target of $90 on 3D Systems.

Meanwhile, Credit Suisse upgraded Stratasys to an "outperform" rating from "neutral," while also raising the stock price target to $144 from $128. As with 3D Systems, relative valuation was cited as the reason. Shares of Stratasys closed up 2.4% at $123.45.

Stratasys shares lost 7.3% in last week's trading after the company announced that it anticipated 2014 earnings to fall short of analysts' estimates, citing an expected rise in operating costs. So today's pop in Stratasys might have been unrelated -- or at least not solely related -- to today's rating upgrade, but rather a partial bounceback caused by investors believing the stock was oversold last week.

3D Systems and Stratasys are the industry's two largest players and have very similar revenue profiles, with the companies generating $460.2 million and $440.5 million in sales, respectively, over the trailing-12-month period. It's not surprising that Credit Suisse noted the growing divergence in valuation between these two companies -- as I just published an article two days ago (3-D Printing Stocks: After Last Week's Big Dips, How Do They Stack Up by Valuation?) noting the same thing. At that time, 3D Systems' price-to-sales and forward price-to-earnings ratios were 36% and 30% higher than Stratasys'.

Granted, 3D Systems is profitable on a GAAP basis, while Stratasys is not, but that's due to Stratasys' late 2012 megamerger with Objet Systems. Stratasys has historically been profitable, and analysts expect it to return to profitability this year. Additionally, 3D Systems has inked some interesting partnerships of late -- including with Google's Motorola unit for Project Ara to create a large-scale 3-D printing manufacturing platform capable of producing customizable open-source modular smartphones, and with Hershey to produce 3-D printed edibles and a new class of 3-D printers for edibles. So some valuation differential is justified, in my opinion. That said, the current valuation differential seemed a bit much to me -- apparently Credit Suisse agrees.  

Stock split for Arcam
Arcam shares soared early in the day and closed up 7.8% at $39.30 when the trading day came to a halt. This was no doubt due to a favorable reaction among investors to Arcam's 4:1 stock split, which the company had previously announced in a Jan. 16 news wire.

You can read more about this topic here.

3-D printers aren't the only growth stocks around. You might want to check these out.
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Fool contributor Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends and owns shares of 3D Systems, Google, and Stratasys. 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

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information