The 3D Printing Rally Will Not Last LongSSYS) and 3D Systems (DDD) have witnessed terrific gains in the reference period. Many 3D printing stocks have been reporting better-than-expected earnings and improved guidance, which in turn has contributed to the substantial rise of the stocks in the 3D printing sector.
While the rally has been impressive, I think investors should not make the mistake of thinking that the companies will turnaround.
The competition in the 3D printing sector has been growing consistently with many new players entering the space every year. However, given the tepid growth of the 3D printing industry as a whole, I don’t think the sector will be large enough to accommodate so many companies. Hence, I think the market leaders will be pressured by the new comers, which is why I think investors should short the latest rally.
My favorite short picks from the sector are 3D Systems and ExOne (XONE). Both the 3d printing stocks have rallied for no significant reasons and I find the upsurge unjustifiable. Out of the two, I think ExOne is a better short than 3D Systems. Despite the fact that ExOne has never beaten analysts’ earnings and revenue expectations since it went public and that it is losing money, investors have bid up the stock in the hopes of a recovery in the 3D printing sector.
However, the increasing competition will hit the likes of ExOne worst as the company is already bleeding money. 3D Systems, on the other hand, is one of the big players and it will struggle to defend its market share against new rivals. Given the increasing competition, I don’t think the recent rally is sustainable and investors should definitely short the stock.
While a rally in the 3D printing sector was long overdue, I think the recent uptick in 3D Systems and ExOne is unjustifiable. I expect both the stocks to come crashing down soon as increasing competition and shrinking margins will take a toll on both the companies. For this reason, I think investors should use the recent rally to short both 3D Systems and ExOne instead of buying into the unwarrantable rally.
Published on Mar 9, 2016By Ayush Singh