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3D Printing Stocks Have Become Cheaper

When we last discussed 3D printing stocks, about 192 days ago, we noted how expensive the four stocks that comprised the sector were. 3D printing stocks were buried on no news  that day and we suggested that it could be the start of a severe downturn. Our assessment was spot on. In a little more than 6 months, the four main 3D printing stocks, voxeljet (VJET), ExOne (XONE), 3D Systems (DDD), and Stratasys (SYSS) have been slashed anywhere from 30-60%, while Wall Street continues to soar to historic highs:

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NameSymbol11/19/2013 Close5/30/2014 Close192 Day % Chg52 Wk High52 Wk LowYTD % Chg
voxeljet ADSVJET58.0114.21-75.5070.0012.85-64.02
ExOneXONE57.8129.67-48.7078.8024.34-50.93
3D SystemsDDD75.5150.65-32.9097.2841.05-45.50
StratasysSSYS116.9293.02-20.44138.1074.54-30.94

Between late November 2013 and today, the four 3D printing stocks have lost a combined 4.72 BILLION in market cap value:

NameSymbolMarket Cap 11/19/13Market Cap 5/30/14Loss of Market Cap
voxeljet ADSVJET904.96M221.68M683.28M
ExOneXONE831.7M428.49M403.21M
3D SystemsDDD7.76B5.24B2.52B
StratasysSSYS5.70B4.59B1.11B

So now that the four competitors have been beaten, tarred, and feathered, it is time to assess 3D printing stocks again to determine if the valuations have improved enough for investment. First, we will look at the revenue, cash, and debt levels now as compared to late November. With two completed quarters in the book, we will get a sense of whether the price destruction was justified and where we are headed.

NameSymbolAnnual Revenue 11/19/13Annual Revenue 5/30/14Cash 11/19/13Cash 5/30/13Debt 11/19/2013Debt 5/30/2014
voxeljet ADSVJET11.06M16.38M818K36.84M9.03M4.77M
ExOneXONE41.53M38.83M115.41M77.59M3.38M3.07M
3D SystemsDDD460.15M559.08M345.36M306.70M18.85M18.92M
StratasysSSYS400.47M538.14M614.89M607.54M00

As you can see from the above table, only voxeljet (VJET) has increased revenue AND increased cash balances in the last two quarters. Surprisingly, despite being the only company to increase both metrics, the stock has suffered worse than the other three. ExOne (XONE) has seen its revenues dip in the past two quarters AND cash balances drop by almost $40 million! 3D Systems (DDD) and Stratasys (SYSS) have improved revenues rather significantly over the past two quarters, but cash has been burned, and significantly in the case of 3D Systems. Debt has been and remains an insignificant factor for all four companies. Clearly, the four companies have not done enough to stave off destruction of their share prices. The companies were completely overvalued, so we think the ensuing selloff was well justified.

Finally, let’s have a look at the revenue multiple, which was completely out of hand before everyone and their mother started selling 3D printing stocks:

NameSymbolEPS 11/19/13EPS 5/30/2014Revenue Multiple 11/19/13Revenue Multiple 5/30/14
voxeljet ADSVJET-6.25-0.3881.8213.53
ExOneXONE-0.34-0.7220.0211.04
3D SystemsDDD0.460.4316.869.37
StratasysSSYS-0.80-0.2014.238.53

With the stock prices coming down, the multiples have indeed improved. In the case of VJET, the multiple dropped from over 80 to under 15!

Recommendation: While it was obvious back in November 2013 that the 3D printer stocks needed to be sold due to outlandish valuations and tiny revenues supporting those valuations, that problem is not as stark now. While these stocks could and very well may, continue to drop, the valuations are definitely improving. DDD and SYSS are already multi-billion dollar corporations with revenues still well under a billion. They don’t excite me as their upsides are limited due to already mature market caps. XONE has actually seen a decline in revenue and burned through mucho cash. Not very good. So I’m not interested in them either.

VJET, however, has seen a small increase in revenue, has built it’s cash foundation up to $37 million and has shed a whopping $688 million in market cap, leaving it with a very small $221 million dollar valuation. While revenue still remains tiny, the small market cap now gives us room to grow and offers the opportunity for a cheap buyout from a larger entity. There may be some short term pressure, but we see the stock bouncing back to at least $20 per share over the next year, representing a 40% upside.

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