Don't Worry, You Can Still Short 3D Systems

3D Systems (DDD) has been my best ever short call. I recommended shorting the company when it was trading over $90, and I expect it to hit single digits soon. Last week, 3D Systems announced that its CEO Avi Reichental has resigned after a 12-year run. Chief legal officer Andrew Johnson will serve as interim CEO while the board searches for a permanent successor.

I think the resignation further highlights the problem with the company. Not that I think Reichental was a great CEO. But the resignation came in just a few days before the company’s earnings report, which is why I find it suspicious.

As brutal as it may sound, but I think Reichental was a terrible CEO.
Reichental had sanctioned almost 50 M&A acquisitions over the past few years. Given that as many as half of M&A end up as a failure, 3D Systems’ downfall isn’t surprising. The company has found it impossible to integrate these acquisitions into its core businesses. 3D Systems is still a house of cards, and the failed acquisitions will cost 3D Systems a fortune in goodwill write-offs.

The company is scheduled to report its Q3 earnings on 4th November. Analysts are expecting 3D Systems revenue to grow 8.5% year-over-year to 181 million. Just a few months ago, analysts were expecting 3D printing to be a multibillion dollar industry with 3D Systems being the leader. Although I have always dismissed that notion multiple times, an 8.5% revenue jump for a company in its “growth phase” is dreadful to say the least. On the earnings front, the Street is expecting 3D Systems’ income from $0.18 per share to $0.07 per share.

However, given the uselessness of the 3D printing technology as a whole, and the possibility of goodwill write-offs, I can see 3D Systems missing the modest consensus targets. With the shares already trading at around $10, 3D Systems still hasn’t bottomed.

I believe 3D Systems has more room to fall, which is why I would still recommend investors to short the stock. 3D Systems’ primary rival Stratasys (SSYS) recently reported awful quarterly numbers due to the slowdown in the 3D printing industry and the chances of 3D Systems reporting similar numbers are quite high. In fact, given the 50 odd acquisitions, I think 3D Systems has the potential to perform even worse than Stratasys. The write-offs put 3D Systems at a great risk of bankruptcy, and the only way investors can profit from the company is by shorting it.


I would like to reiterate my short call on 3D Systems. Despite the stock tumbling following the departure of Reichental, I think the stock could fall further after the earnings report. 3D Systems face several headwinds going forward, and I expect the stock price to plummet to mid single-digit in the months to come.
Published on Nov 2, 2015
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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