What happened

Last week, warnings of a "very, very painful" two weeks of mounting COVID-19 infections and deaths crushed the stock market. This week, the story is taking a more optimistic turn.

With Vice President Pence pointing to glimmers of progress in the government's efforts to slow the spread of the coronavirus, and President Trump saying he sees a "light at the end of the tunnel," investors are skipping ahead a few chapters today, and assuming the end is in sight -- and bidding up shares of companies they expect to profit when things get back to normal: 3D printing stocks in particular.

3D printer

A 3D printer. Image source: Getty Images.

So what

In afternoon trading Monday, shares of 3D printer maker 3D Systems (NYSE:DDD) were surging 15.5% as of 3:25 p.m. EDT, while its archrival Stratasys (NASDAQ:SSYS) was up 13.6%. Proto Labs (NYSE:PRLB), which prints prototype products for corporate customers using 3D printers, was somewhere in the middle, up 14.5%. But is there reason for this optimism?

Sadly, no. In the case of Proto Labs, there doesn't seem to be any news today (other than the generally ebullient headlines citing the president's and vice president's words) that would explain why Proto Labs stock in particular should be doing so very well today. And in the case of 3D Systems and Stratasys, the opposite is true.

Now what

According to a note just out from J.P. Morgan, new entrants are "surging" into the market for making 3D printers, reports TheFly.com, and they appear to be capturing market share from 3D and Stratasys. This new competition, combined with the unpromising prospects of attempting to do business in the middle of a recession, has J.P. Morgan worried that 3D Systems and Stratasys are unlikely to return to growth mode anytime soon.

Neither stock is currently profitable, so even with their prices down 45% and 44%, respectively, over the past 12 months, J.P. Morgan says it finds their valuations "not compelling," and rates both stocks underweight. As for Proto Labs, while J.P. Morgan didn't comment on that one specifically, the fact that Proto Labs is profitable only makes it easier to see that, at 30 times trailing earnings, the stock isn't exactly cheap.

Given all the above, investors may be best advised to use today's rising prices as an opportunity to exit these stocks.

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.