Short Sellers Beware: 3D Stocks Are Still Hot

Chris Lau, Kaptiall: 3D Systems (DDD) squeezed out bearish investors when the company reported strong quarterly results. Since bottoming in mid-March 2013 at a price below $30, shares closed recently at $38.24. The company earned $0.21 per share (non-GAAP) as sales grew by 31%. All financial metrics were solid. In summary, the company reported:

·       Gross profit margins rising to 52.4%

·       Non-GAAP income rising 43% to $18.9 million (GAAP net income was $5.9 million)

·       New product introductions during the quarter

According to finviz, short float is around 33%, and is likely one of the factors driving shares higher by 7% on April 30. Positive upside will likely continue for the 3D printing sector, and especially for 3D Systems. Many company-specific factors continue to be positive for the company. Sales growth remains positive every quarter, spending in R&D continues, and the company expects manufacturing spending  by customers to continue.

Financial Highlights

Investors should note a few significant changes on the balance sheet. Interest and other expenses rose by nearly 3 times compared to last year, to around $10 million. Foreign currency translation contributed to a $3.3 million loss.

On the liabilities side, deferred revenue rose 21% to 18.5 million, while convertible senior notes declined by 46% to $43 million.

Comparable Investments

3D Systems is valued at a price of profit (or forward P/E) of 37, far higher than Dassault (DASTY), whose POP is 26. ExOne (XONE) has a POP of over 70. ExOne reported quarterly results at the end of March that were solid. ExOne is unique in that it uses binder jetting technology. The product also prints in sand and metal.

Fellow 3D printer maker Stratasys (SSYS) rose earlier in the month when the company was given an $82 price target by investment firm Canaccord.

Dassault (DASTY) reported revenue growth in Asia (up 8%) and the Americas (up 7%) in the first quarter. The company improved earnings, which increased by 10%. Cash flow rose 12%, helped by working capital improvements.

To view the volatility in share price over the last year, click “play” below:

Conclusion

Investors bearish on the 3D printing sectors should beware. The short squeeze underway may take some time to play out, and the stocks may find new highs very soon.

Written by Chris Lau

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