What happened

After a tremendous earnings report and a fantastic rally in reaction to it -- shares up more than 35%! -- 3D Systems (NYSE:DDD) 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.

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.