3D printing veteran 3D Systems (DDD -4.32%) has seen better days. The stock has set fresh 10-year lows on a daily basis in recent weeks. Share prices have crashed 47% lower year to date, and we're looking at a 95% plunge from the lofty heights of $97 per share in early 2014.
Is 3D Systems' stock likely to bounce back from this dark trough, or are the company's glory days gone for good? Let's have a look.
Why is the stock so cheap?
3D Systems has been struggling for years. Annual sales fell 6% between 2015 and 2019, operating profits are consistently negative, and the company is burning cash is nearly every quarter. A new CEO took the reins in May, and 3D Systems has gone through three CFOs in less than four years. The executive changes were planned long before the COVID-19 pandemic came along to add new challenges to an already difficult business environment.
Revenue plunged 29% year over year in August's second-quarter report, sparking a dramatic reorganization and a sharp cost-cutting program. The recently installed management team made sure to include cash-raising ideas in these actions, allowing 3D systems to sell up to $150 million worth of new stock if the cash crunch turns critical. The company had $64 million of cash equivalents available at the end of June, down from $134 million in the year-ago period.
On the upside, 3D Systems' long-term debt sits at just $22 million and the company has an untouched $100 million credit facility available if necessary. It would take a lot of bad news to drive this company entirely out of business.
So, is 3D Systems a buy today?
3D Systems is focusing on 3D printing in "growing markets that demand high-reliability products," according to the company's revamped statement of purpose. That means finding customers in attractive target markets and helping them develop additive manufacturing processes that give them an edge in their own business efforts, which should lead to a rising number of valuable long-term business relationships.
This clear business plan makes me think that 3D Systems could be worth a small, speculative bet just in case the ambitious recovery plans actually work out. 3D printing remains a hot topic and a promising technology for the far future -- it's just difficult to find real-world applications for it at this point. If 3D Systems becomes a consulting powerhouse that helps clients overcome that challenge, that would not only be great for the company's own financial results but also worthwhile for the 3D printing sector as a whole.
However, the proof is in the pudding, and that's not something you can just print out on a whim (yet). I would not recommend backing up the truck or investing your entire nest egg in this combination of high risk and large potential rewards. You can build a small position in 3D Systems but only if you're willing to shoulder the risk, and be careful out there.