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Why 3D Systems, Ensco, and Seagate Technology Slumped Today

By Dan Caplinger - Apr 15, 2016 at 5:51PM

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These stocks helped lead the markets lower Friday. Find out why.


Image source: 3D Systems.

The stock market ended the week on Friday on a slightly negative note, but once again, volatility in the major market benchmarks was muted. Investors seemed content to allow earnings season to play out a bit further before drawing conclusions about the state of the U.S. economy, and after an impressive recovery from the correction that the stock market suffered earlier in the year, holding onto recent gains is an achievement worth noting. Other markets were mixed, with bond yields falling along with crude oil prices even as gold and silver markets rose. Among the stocks that helped hold down the markets on Friday were 3D Systems (DDD 5.59%), Ensco (VAL), and Seagate Technology (STX).

3D Systems fell 6%, giving back much of its sizable gains from yesterday. Analysts responded to the big price jump Thursday by downgrading stocks in the 3-D printing space, and among their arguments was their view that a takeover bid from a tech giant like HP wasn't particularly likely. Even though 3D Systems' stock trades well below its highs over the past couple of years, the state of the 3-D printing industry is still highly in doubt. Moreover, some investors believe that 3D Systems in particular has a competitive disadvantage compared to its rivals in the space, because 3D Systems has historically gravitated toward lower-end printer devices that carry narrower profit margins. Until fundamental conditions in the industry improve, 3D Systems will likely continue to see choppy movements.

Ensco dropped 7% after the offshore drilling services specialist announced that it had priced a secondary offering of shares at price levels well below the current market value. Ensco offered 57 million shares of Class A stock at $9.25 per share, far below the $10.59 price they fetched as of the close on Thursday. The drilling services company also increased the size of the offering by 7 million shares above its original proposal. The offering cited general corporate purposes as the projected use for the proceeds of the sale. Ensco is just one of many companies in the industry that are taking drastic measures to raise capital, and shareholders showed their displeasure at the amount of dilution involved in the secondary offering by sending the stock down toward that offering price.

Finally, Seagate Technology declined 6%. The hard disk drive manufacturer continued to lose ground after a terrible day Thursday, on which it fell 20% in the wake of a warning on revenue and profits for its just-ended fiscal third quarter. Seagate is seeing demand for its smaller drive products start to give way toward cloud-based solutions, and that will put even more pressure on the company to make the transition toward its larger enterprise-targeted drive products. In addition, as solid-state memory solutions become more cost-effective, Seagate will have to figure out how to create a bigger presence in that market as well in order to defend its overall market share in the storage area more broadly. Until that strategy becomes clearer, Seagate could have trouble rebounding from its declines.

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Stocks Mentioned

3D Systems Corporation Stock Quote
3D Systems Corporation
DDD
$11.15 (5.59%) $0.59
Seagate Technology plc Stock Quote
Seagate Technology plc
STX
Valaris plc Stock Quote
Valaris plc
VAL

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