Demand for industrial 3D printers has slowed notably over the last 18 months. Image source: 3D Systems.

As long as a stock remains above $0, there's no rule in investing that says a falling stock can't fall further. After all, a company's fundamentals could deteriorate to the point that it negatively impacts the company's long-term earnings potential, which prompts investors to head for the exit. Unfortunately, even after 3D Systems (NYSE:DDD) has fallen over 80% since its all-time high, there's the risk that things could still get worse from here.

Here are three reasons 3D Systems could fall further.

3D Systems doesn't innovate fast enough

With the recent introduction of Carbon's M1 3D printer and Hewlett-Packard's (NYSE:HPQ) upcoming release of its Multi Jet Fusion printer, 3D Systems faces more competition than ever before. Considering that both of these technologies are significantly faster at building parts than 3D Systems' offerings, they threaten to undermine the company's competitive positioning in the market.

Although management has recently remarked that it hasn't seen mounting competitive pressure, the company hasn't been forthcoming about how it plans to respond to these new technologies -- and how quickly it plans to do so.

Essentially, there are two risks that could weaken 3D Systems' competitive positioning. The first is that HP and Carbon take market share from it. The second is that 3D Systems doesn't respond quickly enough, giving HP and Carbon more time to extend their advantage. Ultimately, the magnitude of both risks could mean that 3D Systems struggles to maintain its positioning.

Joshi's actions don't improve 3D printer demand

3D Systems' recently-appointed CEO, Vyomesh Joshi, brings 32 years of experience as an HP executive and a track record of operational excellence. But with only four months on the job, Joshi hasn't objectively proven that he can replicate his previous successes at 3D Systems. The reason to be skeptical of Joshi's staging a turnaround is that the 3D printing industry has been seeing slowing demand for the past 18 months. Most recently, 3D Systems' second-quarter printer sales fell 30% year over year -- a significant acceleration from the 17% fall it reported in the first quarter.

Between the slowdown in demand, which hasn't shown any notable signs of improvement, and new competition coming online, 3D Systems may have to compete harder for less available business. In this scenario, it could prove challenging for 3D Systems to sell customers on how its offerings are differentiated.

Reseller woes

3D Systems currently sells its products directly to customers and through a network of resellers. Typically, 3D Systems' resellers are contractually obligated to sell only the company's products, meaning a 3D Systems reseller cannot also become a reseller for another 3D printer company.

However, if 3D Systems struggles to remain competitive in the future, its resellers may push for renegotiation to allow selling other 3D printing brands. In other words, the competitive environment can also have a major impact on 3D Systems' distribution channel.

During 3D Systems' second-quarter earnings call, Joshi noted, "I don't think we are seeing any [reseller] turnover. There is lot of noise in the market, but we don't see any turnover." The risk is if this "noise" turns into action.

Look before you leap

As is always the case with investing, there are no guarantees, even when it comes to risks facing a company. However, being aware of the risks before making an investment is an important step in understanding the major factors that could derail an investment thesis. As far as 3D Systems is concerned, the majority of its risk currently hinges on how well the company navigates the uncertainties surrounding the competitive and macro environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.