If you're following the 3-D printing stocks, you likely know the group had a rough-and-tumble time in the market last week. The dual catalysts for the group's drops, which both came on Tuesday, Jan. 14, were Stratasys' (SSYS +0.63%) announcement during the trading day that it anticipated 2014 earnings to fall short of analysts' estimates, followed by ExOne's (XONE +0.00%) issuing of a statement after the market close that its 2013 revenue would be less than expected.
As is typical within a sector or industry, shares of fellow 3-D printing companies 3D Systems (DDD 1.07%) and voxeljet (VJET +0.00%) fell in sympathy, though 3D Systems nicely recovered. Arcam (NASDAQOTH: AMAVF) shares held quite steady.
When the market closed out the trading week, Stratasys, ExOne, and voxeljet were decided losers, down 7%, 13%, and 6%, respectively; 3D Systems matched the overall market's performance of -1%; while Arcam closed up nearly 4%.
Data by YCharts
Why the market over-reacted to the news
Let's get to the specifics of the news announced by Stratasys and ExOne.
Stratasys expects its 2014 adjusted earnings per share to be in the $2.15-$2.25 range, below analysts' estimates of $2.31. The company cited a significant increase in its operating expenses as the reason.
The market overly punished Stratasys for this news, in my opinion. It would be one thing if an anticipated drop in revenue was cited as the reason, as that would likely signal a decreasing demand for the company's 3-D printers. But Stratasys' revenue guidance of $660 million to $680 million is actually above analysts' estimates of $658.5 million.
Stratasys' operating income is expected to increase for good reasons, as the company plans to ramp up its marketing and research and development efforts. If Stratasys wants to stay a leader in the fast-evolving and competitive 3-D printing market, it has no choice but to increase its short-term expenses in an effort to fuel long-term staying power and growth.
Stratasys needs to ratchet up its game, as its primary competitor, 3D Systems, has been going gangbusters in the past year with some key acquisitions and partnerships. 3D Systems' buyout of Phenix Systems last summer has given it metals printing capabilities. Its diverse partnerships include teaming with Google for Project Ara to create a large-scale 3-D printing manufacturing platform capable of producing customizable open-source modular smartphones, and its just-announced partnering with Hershey to produce 3-D printed edibles and a new class of 3-D printers for edibles.
ExOne lowered its 2013 revenue expectation to a range of $40 million to $42 million, below its prior guidance of $48 million. The company cited delayed approvals for foreign sales in Russia, France, India, and Mexico as the reason.
The market overreacted in this case, too, in my opinion. ExOne didn't lose any orders here, as this is simply a matter of revenue shifting from one quarter to a later date. In this case, ExOne said these orders will be booked in the first half of 2014. ExOne sells pricey machines costing $500,000 and up, so quarterly revenue should be expected to be "lumpy," especially until the company grows considerably larger.
How the 3-D printing companies currently stack up by valuation
Here's how the pure-play 3-D printing stocks stack up by common valuation measures and a couple of other key metrics, as of Jan. 17:
|
Company |
Market Cap |
Annual Revenue (mil) |
Price/Sales |
P/E |
P/E (frw) |
Operating Margin (ttm) |
Profit Margin (ttm) |
|---|---|---|---|---|---|---|---|
|
3D Systems |
$9.3B |
$460.2 |
20.6 |
196 |
71.3 |
18.7% |
9.6% |
|
Stratasys |
$5.9B |
$400.5 |
15.1 |
N/A |
54.8 |
(2.6)% |
(7.3)% |
|
ExOne |
$829.8M |
$41.5 |
20.9 |
N/A |
186 |
(0.7)% |
(5.7)% |
|
Voxeljet |
$629.9M |
$13.0 |
48.5 |
N/A |
N/A |
0.6%* |
(2.0)%* |
|
Arcam |
$610.1M |
$29.5 |
20.7 |
180 |
N/A |
11.5% |
11% |
Sources: Yahoo! Finance; voxeljet's third-quarter earnings report.
*For nine-month period through Sept. 30.
Those who are currently invested in Stratasys or have been considering buying Stratasys' stock might consider the stock's pullback last week as a buying opportunity. Its valuation, relative to its peers, is compelling for those who believe in the company's long-term growth potential.
The sector's bigger picture
While 6% (voxeljet), 7% (Stratasys), and 13% (ExOne) weekly drops are fairly sizable, the one-year returns put last week's turbulent week in perspective. (ExOne has only been public since February; voxeljet has only been public since October and is up 40.2% from its IPO day closing price.)
Data by YCharts
Foolish final thoughts
Long-term investors shouldn't get too caught up in short-term movements in stock prices, unless those short-term movements have been caused by events that have materially affected their original investing theses.
