What happened
Shares of 3D printer-maker 3D Systems (DDD +27.30%) stock surged 21.5% on Tuesday in response to a boffo earnings report for fiscal second quarter 2021. The stock has given back some of those gains in the days since; as of 12:05 p.m. EDT Friday, for example, the increase in price from last week's Friday close is closer to 12.4%.
But was the earnings report good enough to justify even this gain? And more importantly, where does 3D Systems stock go from here?
Image source: Getty Images.
So what
The first question is easier to answer: Yes, 3D Systems was exactly that good. For Q2, 3D reported sales growth of 44% over last year's fiscal second quarter, and while the company reported both operating and net losses, analysts' preferred metric for the company -- "non-GAAP income per share, diluted" -- was positive $0.12 this year.
That was better than both the company's $0.13 non-GAAP loss from last year and better than the $0.05 pro forma profit that Wall Street had predicted. For that matter, even when calculated according to generally accepted accounting principles (GAAP), 3D's $0.08 per-share net loss for the quarter was a whole lot better than the GAAP loss per share of $0.33 in the second quarter of 2020.
Now what
Company CEO Jeffrey Graves said 3D has "continued positive momentum" after announcing plans to divest its On Demand Manufacturing and medical simulation businesses to focus on 3D printing machines, especially for the healthcare sector.
That being said, after seeing 3D's shares soar Tuesday, Wall Street began worrying loudly that the stock -- which is unprofitable, remember, and trades for more than 7 times sales -- was getting a bit ahead of itself. In twin ratings this week, first investment bank Craig-Hallum (C-H) downgraded 3D shares to "hold," citing valuation concerns, and then Loop Capital announced a $33 price target -- lower than C-H's.
Loop in particular warned that 3D's recent strength in sales growth could be put at risk if Covid-19 begins shutting down the economy again, says TheFly.com. I'm not sure I agree with that logic because distributed manufacturing via 3D printers seems to me like something that should perform well in a longer pandemic. Still, at 3D's current share prices, I suspect discretion may be the better part of valor here.
With 3D Systems stock up more than 450% in the last 12 months, now might be a good time to declare victory -- sell -- and count your profits.
