2 Things Citron Research Got Wrong About 3D Systems Corporation

While Citron brought up a lot of good reasons to be bearish about 3D Systems, there were two areas this Fool took issue with.

Feb 6, 2014 at 5:59PM

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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Blake Bos has no position in any stocks mentioned. Steve Heller owns shares of 3D Systems. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool owns shares of 3D Systems 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.

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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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