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Why Shares of Stratasys, Ltd. Dropped 17% Today

By Travis Hoium – Nov 15, 2016 at 1:37PM

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3D printing is facing some challenges and shrinking revenue in the third quarter didn't give investors any reason to buy into shares of Stratasys, Ltd. today.

Image source: Stratasys.

What happened 

Shares of 3D printing company Stratasys, Ltd. (SSYS -0.28%) fell as much as 17.4% on Tuesday after the company reported third-quarter earnings. At 12:40 p.m. EST, the stock was still down 16.8% on the day. 

So what

Revenue fell 6.2% in the quarter to $157.2 million, falling well short of the $174.2 million analysts were expecting. Net loss was down from $901.3 million a year ago to $20.8 million, or $0.40 per share. But on an adjusted basis earnings of a penny per share, it fell short of Wall Street's estimate of $0.04 in earnings per share. 

Full-year guidance of adjusted earnings per share of $0.13 to $0.21 was also well short of Wall Street's $0.32 estimate. And the prospect of results not improving as quickly as anticipated has investors worried today. 

Now what

The way the market sees it, the 3D printing industry is making a transition from an exciting growth industry to the realities of serving industrial customers with the products they need long term. Stratasys is making solid moves to improve products and become engrained with manufacturers like Airbus that can use their products to reduce the time between design and production. 

What's slightly concerning is that Stratasys is now shrinking on a revenue basis, despite 3D printing becoming more common overall. That makes it harder for the company to cover operating costs and generate a profit. I think 3D printing has a bright future, but this moment of adjustment from exuberance about the technology to a rational understanding of what the opportunity is will take time for adjustment. And investors aren't certain when the upside will come, which is hitting the stock hard today. 

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Stratasys. 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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