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Why 3D Systems Corporation Is Soaring

By Steve Heller – Feb 3, 2016 at 1:10PM

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It appears to another classic short squeeze for the 3D printing maker.

What: Shares of 3D Systems (DDD -3.73%) were sharply higher during early trading on Wednesday absent of any major news. At one point before noon, 3D Systems' stock was up over 14%, while competitor Stratasys (SSYS -2.40%) was up over 4%.

So what: 3D Systems' stock has lost nearly 75% of its value over the last year and short interest continues to remain high. As of Jan. 15, nearly one-third of 3D Systems' shares outstanding were sold short, which indicates strong bearish sentiment toward the company's prospects.

DDD Percent of Shares Outstanding Short Chart

DDD Percent of Shares Outstanding Short data by YCharts.

Although there's no way to prove it definitively, 3D Systems' price action today appears to be a classic "short squeeze." After all, 3D Systems is a heavily shorted stock that moved rapidly higher, on above average volume, without any apparent news. Behind the scenes, this could mean a flood of bears closed out their short positions by quickly buying back shares and created the squeeze.

Now what: It's been a rough couple of years for 3D Systems and Stratasys. Both companies have struggled with execution while dealing with a slowing customer spending environment. The threat of increased competition remains on the horizon, as a number of well-funded entrants are expected to introduce 3D printers with breakthrough technologies later this year. All told, the current path forward isn't exactly clear for 3D Systems and Stratasys investors.

Considering 3D Systems is expected to report its fourth-quarter earnings on Feb. 25 and Stratasys is expected to report on March 2, investors won't have to wait long to know if the clouds of uncertainty are breaking.

Steve Heller owns shares of 3D Systems. The Motley Fool recommends 3D Systems and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

3D Systems Corporation Stock Quote
3D Systems Corporation
DDD
$8.00 (-3.73%) $0.31
Stratasys Ltd. Stock Quote
Stratasys Ltd.
SSYS
$14.23 (-2.40%) $0.35

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