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Why Stratasys, Proto Labs, and Desktop Metal Stocks Dropped 10% This Week

By Rich Smith – Aug 19, 2021 at 5:26PM

Key Points

  • The coronavirus has investors scared again, and the S&P 500 is down.
  • 3D printing stocks have been hurt worse than other stocks.
  • This has revealed a relative value candidate in Proto Labs stock.

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It's the economy, smartypants.

What happened

Stocks tied to the 3D printing industry -- also known as additive manufacturing -- got hit hard this week. Granted, the S&P 500 as a whole closed down 1.4% Thursday evening from its closing price last Friday, so pretty much everyone is hurting.

Still, shares of 3D printers are hurting worse than most, with Stratasys (SSYS -1.33%) declining 11.1%, Proto Labs (PRLB 0.28%) down 12.1%, and Desktop Metal (DM -3.43%) -- a recent SPAC that was an investor favorite as recently as last week -- falling 12.3%.

3D printer.

Image source: Getty Images.

So what

Why might that be? The macroeconomic answers are pretty clear: The delta variant of the coronavirus is running amok -- with nearly 138,000 new reports of infections in the U.S. as of the latest data Wednesday. This is depressing consumer confidence today, and perhaps the whole economy tomorrow.

Speaking more micro-economically, however, it's not entirely clear why this news would be worse news for 3D printers than for other types of companies. Nor has there been any particular bad news regarding Stratasys, Proto Labs, or Desktop Metal to explain their stock price slides.

Now what

Of course, if you flip that around, the fact that there is no bad news -- or at least no news specifically bad for 3D printing -- then it might actually be good news for investors looking for babies that have been thrown out with the bathwater. Out of this group of three 3D printing stocks, Proto Labs looks like the most likely candidate for this category.

Mind you, at a recent valuation of 48 times trailing earnings, even Proto Labs is no obvious bargain. But it is a company with positive GAAP profits -- $41 million earned over the past 12 months -- and positive free cash flow, too -- nearly $37 million. That's more than you can say about either Stratasys or Desktop Metal. My advice would therefore be to keep an eye on all of these stocks, and if they continue to fall for no obvious reason, consider a purchase of Proto Labs before either of the others.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Proto Labs. The Motley Fool has a disclosure policy.

Stocks Mentioned

Proto Labs Stock Quote
Proto Labs
$24.95 (0.28%) $0.07
Stratasys Stock Quote
$12.56 (-1.33%) $0.17
Desktop Metal, Inc. Stock Quote
Desktop Metal, Inc.
$1.69 (-3.43%) $0.06

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

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