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2 Things Citron Research Got Wrong About 3D Systems Corporation

Last week, 3-D printing bear Citron Research issued its second report in a year about how 3D Systems (NYSE: DDD  ) is grossly overvalued and assigned it an "immediate" price target of $56, when stock was trading around $80 a share. While Citron brought up a lot of good points within its 18-page report (PDF link), there were two areas 3-D printing analyst Steve Heller took issue with.

The first was that Citron claimed 3D Systems' Cube 3-D printer hasn't been well received in the marketplace, but it bases this claim on an older generation product, the Cube 2. Expected later this year, the sub-$1,000 Cube 3 will be more capable, easier to use, and affordable than ever before. Because Citron is basing its claims on past results, this reasoning may not continue to hold up well in the future.

Additionally, Citron made the claim that 3D Systems' service bureau is a "low-margin business with low barriers of entry," which isn't necessarily the case when you look at the numbers reported in the company's filings and recognize that a high level of expertise is needed to operate these sophisticated machines.

In the following video, Steve Heller sits down with the head of Motley Fool's industrials sector, Blake Bos, to discuss these issues at length and why investors may want to take these aspects of Citron's report with a grain of salt. What's more, Steve and Blake shed some light on whether or not 3D Systems deserves such a high premium over Stratasys (NASDAQ: SSYS  ) . The relevant segment can be found between 9:05 and 14:22.

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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 February 06, 2014, at 7:11 PM, elmer wrote:

    I think Motley Fool Got it wrong you said DDD was a Great Buy now you are acting like they messed up

  • Report this Comment On February 06, 2014, at 10:06 PM, brandonchen wrote:

    How are you so sure that Cube 2 and 3 will be successful as they haven't even been released yet? If Cube 1 has not been a success, how can 2 and 3 be successful as you claim? How can you say Citron's claim was wrong?

  • Report this Comment On February 06, 2014, at 11:03 PM, brandonchen wrote:

    Cube sales are only small proportion on the whole scheme of things of DDD.. Why make a big deal out of it anyway..

  • Report this Comment On February 07, 2014, at 11:49 AM, wildeweasel wrote:

    Citron's only purpose is to twist facts and use selective reporting to panic gullible investors into selling into a stop-loss dump. I can't believe you guy's would even take them seriously enough to even comment on them. The only reason I even pay a small amount of attention to them is because they help with bringing down the entry points.

    As for DDD and all other 3D printing stocks now is a good time to add to your position if you were so inclined or hold, but no point in selling now.

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Steve Heller

Covering 3-D printing at the intersection of business, investing, and what it means for the future of manufacturing. Follow me on Twitter to keep up with the ever-changing 3-D printing landscape by clicking the button below.

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