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Why Stratasys, 3D Systems, and Desktop Metal Stocks All Crashed Today

By Rich Smith - Feb 18, 2021 at 4:28PM

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Stratasys makes an acquisition -- and earnings reports loom.

What happened

Shares of industrial 3D printing stocks Stratasys (SSYS 4.42%), Desktop Metal (DM 2.15%), and 3D Systems (DDD 3.23%) crashed in unison today. By the time the closing bell struck, Stratasys stock sat lowest with a 15% loss, followed by Desktop Metal, down 9.9%, and 3D Systems, off 8.1%.

And curiously, it's the stock with the biggest loss that has the only news today.

3 red arrows going down and crashing through the floor

Image source: Getty Images.

So what

And it's arguably good news, too. This morning, Stratasys announced that it has acquired U.K.-based large-frame industrial stereolithography company RP Support Ltd. (RPS) to build out Stratasys' "polymer suite of solutions." Beginning to market RPS's Neo line of 3D printers globally, Stratasys predicts this acquisition will be "slightly accretive to revenue" by the end of this year, and add to adjusted per-share earnings.  

Good news? Perhaps, but it's hard to call this great news. Even in the press release announcing the acquisition, Stratasys admits that the entire "global addressable" market for industrial stereolithography systems is only about $150 million, and growing only about 10% per year. RPS would need to grab a very large fraction of that market indeed, if it were to move the needle much on Stratasys's annual revenue stream of $538 million. Moreover, if RPS's business grows at only the average 10% -- or even a bit better than that average -- it's more likely to slow down Stratasys' own total (analyst-projected) earnings growth rate of 30%, rather than speed it up.  

On the plus side, Stratasys didn't say how much it paid for RPS, which implies the number wasn't material. Net-net, this news feels pretty "meh," to me.

Now what

Of course, by the same token, merely "meh" news doesn't really explain why Stratasys stock is going down so much today -- or why 3D Systems and Desktop Metal are following it down.

My guess? Investors are starting to feel nervous about earnings.

3D Systems is due out with fourth-quarter earnings on Feb. 24, with Stratasys reporting a week later on March 1. Analysts have Stratasys pegged for only a breakeven quarter -- much worse than the $0.18 per share it earned a year ago. And 3D Systems, although it told us last month that it might earn a profit, also might not.  

As for recent IPO Desktop Metal, it hasn't announced an earnings date yet. Still, it's logical to assume that any bad news reported by the two leading names in 3D printing could have a knock-on effect for Desktop Metal stock as well, especially as analysts aren't too optimistic about the stock to begin with -- predicting a $0.07 loss for the current quarter.    

Seeing as the only good news we saw in the sector wasn't all that great today, it's understandable that investors might have decided to focus on the prospects of the potential bad news coming down the pike, instead.

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Stocks Mentioned

Stratasys Ltd. Stock Quote
Stratasys Ltd.
SSYS
$19.12 (4.42%) $0.81
3D Systems Corporation Stock Quote
3D Systems Corporation
DDD
$10.56 (3.23%) $0.33
Desktop Metal, Inc. Stock Quote
Desktop Metal, Inc.
DM
$1.90 (2.15%) $0.04

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

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