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Why 3D Systems Stock Soared 61% in November

By Beth McKenna - Dec 3, 2020 at 9:11AM

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When it comes to this 3D printing company, hope springs eternal -- but caution is still warranted.

What happened

Shares of 3D Systems ( DDD 0.99% ), a diversified 3D printing company, skyrocketed 60.8% in November, according to data from S&P Global Market Intelligence

For context, the S&P 500 index returned 11% last month.

Close-up of a 3D printer producing a bright yellow plastic object.

Image source: Getty Images.

So what

We can attribute 3D Systems stock's robust performance last month to several company-specific catalysts, as well as to strength in the overall market.

On Nov. 3, shares rose 8.5% following the company's announcement of the sale of its Cimatron and GibbsCAM software businesses to Battery Ventures for $65 million. This move was part of the company's restructuring plan. The deal is expected to close in the fourth quarter of 2020. Investors surely liked that 3D Systems is on track to get an infusion of cash soon, as liquidity has been a concern this year.

Shares tacked on nearly 12% in the three-day period following the company's release of its third-quarter results on Nov. 5, which beat Wall Street's expectations and led to an analyst upgrade. William Blair's Brian Drab upgraded his rating on 3D Systems stock from underperform to market perform. 

In the third quarter, 3D Systems' revenue fell 13% year over year to $135.1 million. Loss per share under generally accepted accounting principles (GAAP) widened 307% to $0.61. Adjusted for one-time items, including a $0.41 per share pre-tax noncash goodwill impairment charge, loss per share narrowed 25% to $0.03.

This report was far from rosy given that revenue is still declining year over year and the company posted losses on both a GAAP and adjusted basis. That said, both the top and bottom lines managed to easily surpass the Street's consensus estimates. Analysts had been looking for an adjusted loss per share of $0.08 on revenue of $114 million.

Widening our time lens, here's a look at how 3D Systems stock has performed so far in 2020 through Dec. 2. For context, included are shares of rival Stratasys, also a pure play 3D printing company, and Proto Labs, which provides traditional and 3D printing manufacturing services.

DDD Chart

Now what 

I'll reiterate what I wrote in my earnings article:

3D Systems made some progress in the third quarter in its turnaround efforts. Revenue increased notably from the second quarter, and its liquidity situation is on track to improve significantly once the sales of its Cimatron and GibbsCAM businesses close.

That said, it's still early in the turnaround, and year-over-year revenue is still declining. Moreover, the pandemic makes it impossible to determine if the company's underlying revenue performance is improving.

While encouraging, the company's progress doesn't justify the 61% run-up in its stock in November, in my opinion.

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.

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Stocks Mentioned

3D Systems Corporation Stock Quote
3D Systems Corporation
DDD
$21.44 (0.99%) $0.21
Stratasys Ltd. Stock Quote
Stratasys Ltd.
SSYS
$24.02 (-0.83%) $0.20
Proto Labs, Inc. Stock Quote
Proto Labs, Inc.
PRLB
$50.22 (2.47%) $1.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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