What happened

Shares of Stratasys (SSYS -0.08%) lost 13.3% in June, according to data from S&P Global Market Intelligence

For some context, main rival 3D Systems' stock also had a tough month, declining nearly 9%, while the S&P 500 tacked on 0.6%.

Close-up of a 3D printer printing a plastic project.

Image source: Getty Images. 

So what

Stratasys stock's pullback last month was due to two primary reasons, in my view. First, it was a continuation of the retreat that began in mid-May due to the simple reason that the stock price had gotten ahead of the company's performance. While there were some encouraging signs in its Q1 results, Stratasys is still struggling to grow revenue, with a year-over-year decline of 2.8% and revenue from 3D printer sales dropping 11%. Its business performance didn't justify the stock soaring more than 80% for the year through mid-May before it started its pullback. The stock is now up 41.4% for the year through Monday. 

The second reason for Stratasys stock's decline in June was a Wall Street analyst downgrade. On June 26, Goldman Sachs analyst Matthew Cabral downgraded the stock from neutral to sell, and put a $20 price target on it. His main concerns centered around increased competition causing pricing pressure and the company's limited exposure to metal 3D printing. (Stratasys does not make metal 3D printers, but does provide on-demand 3D printing in metals.) Shares fell 11.7% following Goldman's downgrade and comments.

Now what

Investors shouldn't change whatever course they've chosen to follow based upon Stratasys shares' June price drop. The price decline was mostly due to a natural correction in a stock that had run up too far, too fast. The company's business didn't materially change.

Long-term investors also shouldn't buy or sell stocks based upon Wall Street's rating changes and comments, as analysts tend to focus on the short term. That said, Goldman's concerns are both legitimate. Competition potentially causing pricing pressure is the greater threat, in my opinion, as Stratasys' new top management has recently taken some steps to strengthen the company's exposure to metal 3D printing. Investors should monitor Stratasys' quarterly results for indications of increased competition resulting in pricing pressures, which would negatively impact revenue and gross margin.