3-D printing may eventually prove to be the new frontier in architecture and product concepts. It may one day revolutionize how industries design their products and get them to market … at least that’s what advocates of 3-D printing technologies want you to believe.
Over time, they may be right. But the market for 3-D printing today is — at best — sheer speculation. And that’s the reality investors in 3D Systems Corporation (NYSE:DDD) must come to grips with.
For several years now, investors in DDD stock have wanted to be right, playing the “bottom” whenever the decline in DDD stock appears oversold … only to realize, things can still get worse.
DDD stock has been a losing bet. And after the company’s first-quarter earnings miss Wednesday, DDD stock is down another 7%, netting yet another 52-week low.
The market has spoken; it’s time to move on.
A One-Dimensional Experience
Wednesday, 3D Systems reported first-quarter adjusted earnings of 5 cents per share, beating Wall Street estimates by a penny. And the way I saw it, that was the extent of any good news.
Why? Because the 1-cent beat still marks a 66% earnings decline year-over-year. And this explains why DDD stock, which is down 31% year to date, has been in a free-fall, losing 55% of its value over the past year.
Revenue wasn’t any better, either. While the $160.72 million in sales for the first quarter climbed 8.8% year over year, DDD still missed Street forecasts by some $1 million. The company cited negative currency headwinds and demand weakness its aerospace, automotive and healthcare segments as reasons for the weakness.
“We were surprised and disappointed by the abrupt interruption in customer demand late in the quarter from several economic factors that we believe caused many of our customers to defer their planned investments,” said CEO Avi Reichental.
That’s all well and good. But it doesn’t explain the struggles over the trailing 12 months. In fairness to DDD, however, the strong U.S. dollar did eat up a sizable chunk of first quarter revenue. Excluding the impacts on currency, revenue would have beaten estimates by a decent margin, coming in at 17% higher, not 9%.
Plus, 3D Systems did show some volume growth in its Direct metals printers, where revenue climbed 39% on a 46% surge in volume. Still, what’s more important to consider is the direction and size of the entire 3-D printing industry and determine whether DDD can emerge the leader. In that regard, I have my doubts.
Sure, the company has made decent attempts to shore up its business. DDD has spared no expense when it comes to market share growth, pursuing various deals like China-based 3D printing firm Easyway Design and Manufacture Co. But these deals have come at a cost. And while DDD has made great strides in research and development, these investments have yet to pay off.
Bottom Line for DDD Stock
Now that Hewlett-Packard Company (NYSE:HPQ) is ready to enter the market, I’m not going to bet against the industry’s leader in printing technologies.
There is the notion that DDD can become a prime M&A target. But at what price? And how long are investors willing to wait to find “the next bottom” on DDD stock?
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
