When you're a shareholder in a company that's fundamentally changing the dynamics of multiple industries, you're probably used to huge swings in the stock market. 3D Systems (DDD 0.45%) and Universal Display (OLED 1.95%) are two such innovative companies, and their shareholders are likely very familiar with such swings.
But this week, because each company has a large number of investors betting against it, and because quarterly earnings are coming out, the moves could be even larger than normal. Read on to find out what Wall Street is expecting from each company, and what individual investors should be focused on.
|
Company |
% of Shares Short |
When |
Expected Revenue (Millions) |
Expected EPS |
|---|---|---|---|---|
|
3D Systems |
17% |
Friday |
$155 |
$0.21 |
|
Universal Display |
19% |
Friday |
$46.9 |
$0.34 |
Source: finviz.com, E*Trade.
Source: 3D Systems.
3D Systems, a leader in additive manufacturing, is rewriting the rules in everything from industrial manufacturing to health care products. That helps explain why shares of the company ballooned 850% between early 2012 and late 2013. But with the release of preliminary results for 2013 earlier this month, the company saw its shares tumble by as much as 28% in one day!
The reason for the plunge was an expectation of earnings and revenue coming in below forecasts, as well as guidance that is well below what Wall Street is hoping for in 2014. When a stock trades for 170 times earnings, that's what happens when there's even a whiff of bad news.
While these new expectations have been accounted for in the stock's current price, investors should pay careful attention to why earnings are expected to be slower than originally thought. If it's because the company is reinvesting in itself, that could be a great long-term move. If, however, it's because it has had to lower the price point on many of its printers -- management claims this isn't the case -- the stock may continue to fall.
Source: Universal Display, courtesy of LG Chem.
Universal Display, on the other hand, is busy licensing the rights to make lights that brighten every thing from our smartphones to the rooms of our houses while using up far less energy than conventional solutions.
Like 3D Systems, long-term shareholders have been handsomely rewarded: The company's stock is up 460% since bottoming out during the Great Recession. But that ride has been a bumpy one as well. That's largely because Universal Display is a relatively small company, and it has lumpy revenue that can vary greatly from quarter to quarter.
Short sellers aren't big on the company because it essentially relies on patents to generate revenue. As time goes on, patents expire, and new technologies are born. There's no guarantee that Universal Display will always be ahead of the curve.
At the same time, the company is clearly a market leader, and there's no reason to assume that will change. Though results are important, pay close attention to the company's guidance for the upcoming year to get a feel for how the stock might react. And remember, keep your eyes on the long-term time horizon.
