Why 3D Systems Corporation Dropped Today

Does this analyst make a good case or is it just more noise from Wall Street?

Feb 24, 2014 at 11:09AM

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of 3D Systems Corporation (NYSE:DDD) sank 5% today after Bank of America downgraded the three-dimensional printing technologist from buy to underperform.

So what: Along with the two-notch downgrade, analyst Wamsi Mohan lowered his price target to $65 (from $95), representing about 20% worth of downside to Friday's close. While growth investors might be attracted to 3D Systems' top-line trajectory in recent years, Mohan thinks that Mr. Market is currently overlooking the competitive and execution risks surrounding its long-term profitability.

Now what: B of A sees plenty of growing pains ahead for 3D Systems. "(1) Organic growth rate peaking in 2014 and incremental topline growth will come at the expense of margins, (2) We view the increased investments as a catchup in spend necessary to stay competitive rather than driving incremental growth, (3) A lot of the M&A while additive to near term growth, in our opinion, will result in diluting LT organic growth and adds integration and execution risk in the interim, (4) A lot of high profile partnerships sound exciting (Motorola Mobility, Hasbro, Hershey's etc.) but success will be predicated on widespread adoption and margin performance driven by such ventures will likely be challenged," noted Mohan.

Of course, with the stock now off more than 20% from its 52-week highs, those concerns might be offering tech-savvy growth investors with an attractive entry point.

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Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends and owns shares of 3D Systems. 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.

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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." 

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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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