3D printing stocks were once some of the most impressive performers on Wall Street. The potentially game-changing impact of “additive technologies” in fields like manufacturing and healthcare sparked a frenzy of investment in the industry’s first movers.
Consider 2013, the best year on record for 3D printing stocks.
The industry’s two largest players, 3D Systems (DDD) and Stratasys (SSYS) saw their shares roar 161% and 68%, respectively. Proto Labs (PRLB), another player in the industry, also ripped off 80% gains that year, while others like ExOne (XONE) and Voxeljet (VJET) both went public that year to great fanfare.
Unfortunately for many of those early investors, they’ve watched in horror as euphoric gains turned into gut-wrenching losses. If you’d bought an equally weighted basket of four 3D printing stocks — DDD, SSYS, XONE, and VJET — on New Year’s Day 2014, you’d be down more than 80% today.
Now, after poor guidance from SSYS last week that dealt another blow to these stocks, 3D Systems will try to reverse a multi-year selloff when it reports second-quarter earnings on Wednesday morning.
DDD Earnings: What Investors Need to Hear
In the nascent industry of additive manufacturing, there are just a few major players. Because of that, 3D printing stocks tend to all move together, which can be a blessing and a curse.
Last week it was a curse, when SSYS slashed full-year guidance. For the third quarter, it said announced expected revenue between $175 million and $190 million, well below consensus forecasts for $216.5 million. The SSYS stock price plunged 10.5% on the news.
DDD stock also fell, losing 9%.
Wall Street isn’t expecting much from DDD stock in the second quarter. DDD earnings are expected to come in at 9 cents per share, a sharp decrease from the 16 cents per share it earned in the year-ago quarter. Analysts do expect revenues to grow, however; consensus calls for $173 million in the quarter represent a 14.4% year-over-year jump.
Despite the miserable performance of DDD stock this year — shares are down 62% — some experts are citing that as a reason to hope for some upside surprise on Wednesday. Longbow Research‘s Joe Wittine recently upgraded DDD stock from “underperform” to “neutral” in light of the better risk-reward balance brought by the selloff.
According to Benzinga, he also cited an increased distribution network as a net positive, with five new resellers added in the quarter, among them:
- Easyway in China
- HK 3D in the UK
- Konica Minolta’s Australia sales channel
- Thermo Fisher Scientific for U.S. K-12
- MLC CAD in the U.S.
I wouldn’t bet one way or the other on DDD stock ahead of Q2 earnings. History has taught us that trying to catch a falling knife doesn’t often end well. While lower expectations work in the stock’s favor, rapidly decelerating revenue growth (53% in 2012, expected 14% in 2015) isn’t the type of trend I usually get behind.
Until we see improvement at 3D Systems and — more importantly — across the entire industry, I’d stay away from 3D printing stocks entirely.