Why 3D Systems Corporation Caused 3-D Printing Stocks to Crash

3D Systems’ issued a profit warning, bringing the entire sector down with it, but it wasn't enough to shake this Fool.

Feb 5, 2014 at 3:15PM

Thanks to 3D Systems (NYSE:DDD), 3-D printing stocks are taking a beating today. The 3-D printing giant released its preliminary 2013 full-year results and issued 2014 full-year guidance, and the market didn't take kindly to the news. Shares of 3D Systems were down as much as $21 a share during the trading session today, losing about 28% of its market value. The news also brought down Stratasys as much as 13%, ExOne down as much as 15%, and voxeljet down as much as 14%.

Why the wheels fell off
Investors reacted so poorly to the news because the company lowered its full-year 2013 earnings guidance, and its full-year 2014 earnings guidance came in much lower than expectations. Originally, 3D Systems was expecting to earn between $0.93 and $1.03 per share in 2013 on an adjusted basis, but now expects to earn between $0.83 and $0.87 per share.

The company's recent plan to accelerate its R&D investments and increase its sales and marketing expenses, along with generally higher costs related to making acquisitions, are playing into why 3D Systems lowered earnings guidance. The hope is that these increased investments in the short term will deliver superior results over the long term. However, investors should recognize 3D Systems' R&D expenditures as a potentially major risk to the long-term story.

Prior to today's announcement, analysts were expecting 3D Systems to earn $1.27 a share on an adjusted basis in 2014 – far above the $0.73-$0.85 a share the company expects to earn in 2014.

It's not all bad news
Despite all the negativity, there were a few notable bright spots to suggest that 3D Systems' long-term story is still on track. The company expects to double its revenue over the next couple of years, and sustain a 30% organic growth rate, adjusting for recent acquisitions. Considering the 3-D printing industry as a whole is expected to grow by around 20% year, this suggests that 3D Systems will be gaining market share in the years ahead. Over the long term, this increased market share could lead to increased material sales, which could boost long-term profitability, primarily because 3-D printing materials remains 3D Systems' most profitable business segment.

In addition, the company's backlog has nearly doubled to $28 million on a sequential basis, indicating that demand for its products, including the high-end, remains strong. This could be viewed as an encouraging sign that 3D Systems' new products are being well received in the market place.

The million-dollar question
As advocates of long-term investing, we Fools believe that it's important to monitor big price moves to ensure major developments haven't materially changed the long-term-investment thesis. Although it's never fun losing 15% or 20% of your investment in one day, it's extremely important to divorce your emotions from the equation and look long and hard at whether these developments will affect the long-term business underneath, and warrant taking action.

The truth of the matter is that 3D Systems told investors during its third-quarter conference call that it expects its 2013 full-year-earnings guidance will come in lighter of expectations because of its aggressive growth initiatives; today's update is merely a revision to that development, and only affects the bottom line. I'd be a lot more worried if revenue guidance was lowered significantly, because it could indicate the there may be structural issues with 3D Systems' business. In other words, I currently don't think there is enough here to warrant selling your shares today.

Ultimately, 3D Systems' management appears to be sacrificing short-term profitability in exchange for long-term future earnings potential. For investors, it's encouraging to see a management team that's more committed to the long-term story than it is with making short-term trade-offs just to please Wall Street expectations. If you're willing to go along for the wild ride, I think investors will likely be well served by sticking with this line of thinking. As a 3D Systems shareholder, I'm holding on tightly today.

One must-own stock in 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Steve Heller owns shares of 3D Systems and ExOne. The Motley Fool recommends 3D Systems, ExOne, and Stratasys. The Motley Fool owns shares of 3D Systems, ExOne, and Stratasys. 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.

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