Don't say you weren't warned. Ten days ago, in a preview of coming attractions, investment banker Piper Sandler alerted investors to the risk that "challenging markets" in the "automotive, aerospace, elective healthcare, and dental verticals" would cause 3D Systems (NYSE:DDD) to report "weak" sales results in fiscal Q1 2020 (reported by TheFly.com). Ten days later, 3D Systems did just that.
The company's Q1 sales number, which came out yesterday, was $134.7 million versus the $140.6 million that most other analysts were forecasting. Pro forma, the company did lose a bit less money than expected -- $0.04 per share versus the $0.05 loss anticipated -- but even so, a loss is a loss.
With its theory confirmed, today, Piper Sandler announced that it is lowering its price target for 3D Systems stock -- to $7.
Does 3D deserve the cut? Well, let's see.
From Q1 2019 to Q1 2020, 3D Systems has suffered an 11% decline in sales. Granted, the company was probably correct in blaming "the COVID-19 pandemic" for its difficulties. It's also worth noting that the $0.04 loss that 3D highlighted in its report was only a pro forma number. When calculated according to generally accepted accounting principles (GAAP), 3D lost $0.17 per share.
All that being said, 3D's news was far from all bad. For one thing, the company's Q1 2020 GAAP loss (and its pro forma loss, too, for that matter) was less steep than the $0.22 the company lost in Q1 2019. For another, 3D burned significantly less cash this past quarter than it did a year ago. The company's $2.3 million in negative operating cash flow represented an 85% reduction in cash outflows for the quarter. Combined with tight fiscal discipline and a halving in capital expenditures (to $4.4 million), this resulted in total cash burn for the quarter of "only" $6.7 million.
So sure, ideally, a stock investor would prefer to see no cash burn at all at a public company. But given that a year ago, this company was burning through $24 million in cash a quarter, it's clear that Q1 2020 marked an improvement in 3D's fortunes -- coronavirus notwithstanding.