Please ensure Javascript is enabled for purposes of website accessibility

Why 3D Systems Stock Dropped 12.8% Today

By Rich Smith - May 12, 2021 at 12:54PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After the earnings beat, there's a downbeat reaction on Wall Street.

What happened

After a tremendous earnings report and a fantastic rally in reaction to it -- shares up more than 35%! -- 3D Systems (DDD 2.45%) is giving back some gains Wednesday. As of noon EDT, shares were down 12.8%.

Why is that?

3D printer

Image source: Getty Images.

So what

3D Systems reported eight times the pro forma profits it was expected to earn this week (according to stock analysts), and its earnings when calculated according to generally accepted accounting principles (GAAP) were twice its pro forma number -- $0.36 per diluted share. And for the record, that makes this the second time in a row that 3D has reported sales and earnings far greater than what Wall Street was expecting.

That explains the stock rally yesterday. As for the sell-off today, however, chances are what we're looking at is a simple case of investors taking profits after betting correctly on a 3D Systems earnings beat. But I have to say that Wall Street isn't helping the company much today, either.

In back-to-back ratings adjustments, Loop Capital lowered its price target on 3D Systems stock to $24 a share this morning, then B. Riley raised its target -- but only by $1, to $26 a share. Both analysts praised 3D for an outstanding performance in Monday's report, but they also seem to think that the good news is priced into the stock, and rated 3D Systems a hold at today's prices.  

Now what

I get why they would say that. On the one hand, yes, the way things are going, I would be willing to bet good money that 3D Systems will beat current analyst sales and earnings estimates this year. Indeed, with 81% of predicted profits for the year already in the bag at the end of just Q1, I don't see how 3D could fail to beat earnings expectations this year. That being said, we're still looking at a company valued at $3 billion, but with negative GAAP earnings over the past 12 months, and negative free cash flow as well.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends 3D Systems. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

3D Systems Corporation Stock Quote
3D Systems Corporation
$12.12 (2.45%) $0.29

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.