Why 3D Systems Corporation Dropped Today

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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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Read/Post Comments (11) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On February 24, 2014, at 11:47 AM, CoolHandJoe wrote:

    This article doesn't help me much. It appears to reiterate what B of A said (fair enough) but the now what section doesn't explain why the individual points are or are not valid. To me the article breaks down as follows: The stock dropped because of these B of A reasons. If you know what you're doing you know that you should buy more.

    If I knew what I was doing why would I need Motley Fool?

    FYI, I like Motley Fool and am a premium subscriber but this article does not help me at all. If I were thinking about selling this would not change my opinion in the slightest.



  • Report this Comment On February 24, 2014, at 11:53 AM, tonyd14 wrote:

    This article left me feeling confused as all it did was quote what B of A said with nothing of any value from the writer.

  • Report this Comment On February 24, 2014, at 12:57 PM, duke6066 wrote:

    Agree completely with the above two comments. I can read the B o A commentary on the web. I don't need to have it repeated here. Insightful comments completely lacking. -JJFa

  • Report this Comment On February 24, 2014, at 1:52 PM, hisnibs1 wrote:

    I am a new community member to premium services and have to say "I agree!" I am here looking for the value in information I stop to read here. Please don't slip into a crowdsourcing frame of mind where editing is faster / easier, where content is King Jester - somewhere - like Seeking Alpha maybe.

  • Report this Comment On February 24, 2014, at 4:53 PM, kfivefive wrote:

    Haven't done any research today (too busy) but my first reaction when an analyst pans a stock is can someone guarantee they (BOA in this case) didn't short DDD last week?

  • Report this Comment On February 24, 2014, at 4:59 PM, gr8twhtebuffalo wrote:

    An analyst downgrade today along with a new earnings report coming out this Thursday. It could be a bumpy March for DDD.

  • Report this Comment On February 24, 2014, at 5:32 PM, shooty68 wrote:

    I agree with the first few comments - you left me "hanging". What are you thinking about DDD at MF? I'd appreciate "closing opinions" on all the articles you have for us. That's why I have the 2 services I subscribe to.

  • Report this Comment On February 24, 2014, at 7:48 PM, whackwhack wrote:

    This article did not inform me in any way other than "buy low" well, I already "bought high", so what to do now? Can DDD outperform B of A's projections? Is this a long term hold with potential over the next __ years?

  • Report this Comment On February 24, 2014, at 9:23 PM, truthwilgetu wrote:

    ask yourself this, how many of your friends have one sitting on their desk at home? I'd say we are still pretty early here.

  • Report this Comment On February 25, 2014, at 2:18 AM, wildeweasel wrote:

    One thing that I have seen consistently with analysts is that they tend to follow the stock trend not predict future price. You can guess at the weather a day in advance and you will statistically be right as often as the weather man. If you like DDD stay on it, ignore the noise, and remember why you bought it in the first place.

  • Report this Comment On February 26, 2014, at 2:06 PM, purdydb wrote:

    I am a Premium subscriber as well. Unfortunately, this type of article is becoming the Foolish norm. It is released to the general public only to sell a Fool service, ONE in this case. All true analysis is held for internal customers. I'm OK with keeping a pay-wall up, but this makes the Fool look foolish and blatantly commercial.

    I remember the old days, when the Fool was way less commercial and proud of it. I guess that didn't pay well enough.

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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Related Tickers

8/27/2015 4:01 PM
DDD $12.90 Up +0.85 +7.05%
3D Systems CAPS Rating: ****