Quite a bit of wind has been taken out of the 3D printing revolution’s sails in the past year. While 3D printing is still taking off in the corporate and manufacturing markets, serious consumer demand has yet to materialize. As a result, companies like 3D Systems Corp. (NYSE:DDD) saw expectations decline because there was more emphasis put on consumer demand than industry growth, and DDD stock followed suit.
For its part, DDD stock appears to finally be leveling off following Wall Street’s 3D printing hype. And we’ll get a look at how well 3D Systems is managing this Wednesday, when the company steps into the earnings limelight to release its Q2 earnings figures.
By the numbers, 3D Systems is expected to post a profit of 6 cents per share, up sharply from 3 cents per share in the same quarter last year. Revenue is seen falling 5.6% to $161.01 million. As proof that hype in the brokerage community has been reined in, EarningsWhispers.com reports a whisper number of 6 cents per share, in line with the consensus.
But, have expectations fallen too far? Looking at Zacks data, we find that only one analyst rated DDD stock a “buy,” compared to 9 “holds,” and 4 “sell” ratings. Furthermore, the 12-month consensus price target for DDD stock arrives at $13.98 — a premium of only 4.4% to Friday’s close. Should 3D Systems offer up better than expected earnings, it could shake a few of these bears loose.
But analysts aren’t the only ones betting against DDD stock. For instance, 24.9 million DDD shares are currently sold short as of the most recent reporting period. This wealth of short interest accounts for more than 26% of DDD stock’s total float and could provide fuel for a covering rally.
Click to Enlarge Regarding options activity on DDD stock, if short sellers are nervous, they aren’t showing it buy hedging their positions with call options.
Specifically, the August put/call open interest ratio for DDD arrives at 1.01, with puts and calls in parity among near-term options. However, there is a hint of caution in the weekly Aug. 5 series, where the put/call ratio rests at 0.60.
Overall, weekly Aug. 5 series implieds are pricing in a potential post-earnings move of about 9% in DDD stock. This places the upper bound price near $14.44 and the lower bound near $12.06.
2 Trades for DDD Stock
Put Spread: For those traders looking to side with the prevailing bearish sentiment on DDD stock, an Aug $12/$13 bear put spread has plenty of potential. At last check, this spread was offered at 13 cents, or $13 per pair of contracts. Breakeven lies at $12.87, while a maximum profit of 87 cents, or $87 per pair of contracts, is possible if DDD stock closes at or below $12 when August options expire.
Call Spread: While the potential for a major surprise is unlikely, there is plenty of sideline money to help push DDD stock well above its expected move on better-than-expected results. Traders wanting to take a chance on a contrarian position might want to consider an August $14/$15 bull call spread. At last check, this spread was asked at 17 cents, or $17 per pair of contracts. Breakeven lies at $14.17, while a maximum profit of 83 cents, or $83 per pair of contracts, is possible if DDD stock closes at or above $15 when August options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
