What happened
Stocks of industrial 3D printing stocks Stratasys (NASDAQ: SSYS), Table metal (NYSE: DM), and 3D Systems (NYSE: DDD) fell in unison today. At the time the closing bell rang, Stratasys shares were in the worst position, down 15%, followed by Desktop Metal, down 9.9%, and 3D Systems, down 8.1%.
And interestingly, it is the stock with the biggest loss that today we only have news.
Image source: Getty Images.
And
And it is arguably good news too. This morning, Stratasys announced that it has acquired the UK’s large industrial stereolithography company RP Support Ltd. (RPS) to build Stratasys’ “polymer solution set”. Starting to market RPS’s Neo line of 3D printers worldwide, Stratasys predicts that this acquisition will be “slightly revenue aggregating” later this year, and will add to adjusted earnings per share.
Good news? Perhaps, but it is difficult to call this great news. Even in the press release announcing the acquisition, Stratasys admits that the entire “global addressable” market for industrial stereolithography systems is only $ 150 million and growing only about 10% a year. RPS would need to grab a very large fraction of that market, in fact, if it wanted to change Stratasys’ $ 538 million annual revenue stream a lot. Furthermore, if RPS’s business grows by only 10% on average – or even slightly better than that average – it is more likely to decrease the overall earnings growth rate itself (projected by analysts) by 30%, instead of speed it up.
On the positive side, Stratasys did not say how much it paid for the RPS, which implies that the number was not material. Net-net, this news seems very “meh”, to me.
What now
Of course, likewise, mere “meh” news doesn’t really explain why Stratasys shares are falling so much today – or why 3D Systems and Desktop Metal are following this.
My guess? Investors are starting to get nervous about profits.
3D Systems is expected to announce fourth quarter earnings on February 24, with Stratasys’ report a week later, on March 1. Analysts estimated Stratasys to be just a quarter of balance – much worse than the $ 0.18 per share it earned a year ago. And 3D Systems, although it told us last month that it could make a profit, can also do not.
As for the recent IPO Desktop Metal, it has not yet announced a earnings date. Still, it stands to reason that any bad news reported by the top two names in 3D printing could have a side effect on Desktop Metal’s stock as well, especially since analysts aren’t too optimistic about the stock to begin with – predicting a $ loss 0.07 in the current quarter.
Since the only good news we saw in the industry was not so good today, it is understandable that investors may have decided to focus on the prospects for potential bad news peaking instead.