What happened
After plunging more than 62% in April, shares of Velo3D (VLD -2.29%) failed to find any relief and continued to slide last month. A disappointing earnings report and bearish sentiment from Wall Street led investors to turn away from the 3D printing stock; consequently, the stock fell 30% in May, according to data from S&P Global Market Intelligence.
The stock's performance over the past two months is a stark turnaround from the 19% rise it achieved through the first three months of 2022.
So what
After April showers washed away more than 60% of the stock's value, investors hoped the stock would blossom in May. A weaker-than-expected first-quarter earnings report, however, quickly cast doubt that the stock would, in fact, bloom. Failing to meet analysts' top- and bottom-line estimates, Velo3D reported sales of $12.2 million and adjusted earnings per share (EPS) of negative $0.13. Analysts had anticipated revenue and adjusted EPS of $12.4 million and negative $0.10, respectively.
Image source: Getty Images.
Besides the company's inability to meet analysts' expectations, the company's growing cash burn likely spurred investors to click the sell button. Whereas Velo3D reported negative cash from operations of $2.6 million for Q1 2021, the operational cash outflow grew significantly in the first quarter of 2022, totaling negative $30.1 million. Similarly, the company's balance sheet may have raised a red flag for investors. Velo3D ended Q1 2022 with $104.4 million in cash and cash equivalents -- about half of the $207.6 million in cash and cash equivalents it had at the end of 2021.
Another catalyst for the stock's decline last month was a bearish take on the stock coming from Wall Street. Shortly after the company reported earnings, James Ricchiuti, an analyst at Needham, slashed his price target to $6 from $15 though he kept a buy rating on the stock, according to The Fly.
Now what
Following the rampant sell-off over the past two months, shares of Velo3D have continued to tumble, falling another 19% through the first week of June. While pessimism has surrounded the stock during April and May, it's not as if there aren't any bulls choosing to scoop up shares. Cathie Wood, for example, has been steadily adding to her position. The Ark Space Exploration & Innovation ETF and ARK Autonomous Technology & Robotics ETF, for example, purchased a combined 175,813 shares in May.
While there were several areas of concern in the company's Q1 2022 earnings report, it's important to note that there were some encouraging signs as well, including the fact that the company grew its backlog to a company record $55 million. Despite the stock's recent slide, investors would be foolish to completely forsake the company at this point. It's still the early innings for Velo3D, and volatility in growth stocks like this one is far from uncommon.
