One of the hottest stock market sectors related to technology has to do with three-dimensional (3-D) printing machines. It won’t be long before every child wants a 3-D printer in the household. It is a hot stock market sector, and it is worth paying attention.
In that regard, one of the hottest initial public offerings (IPOs) this year has been The ExOne Company (XONE). This is a company we’ve looked at several times in this column, and it definitely is a speculative stock for traders.
Of course, the big problem with hot IPOs is their valuation—or rather, their extreme valuation in the face of a newly established enterprise. Most often there is no way to appropriately value an exciting, but still developing company. It’s all about the illusion becoming real. The marketplace sees the company’s opportunity and potential, and if there is a reasonable probability that it will meet its growth forecasts, Wall Street discounts the expected growth many years in advance.
This is how a small, but growing company like ExOne quickly earns a billion-dollar valuation.
Last quarter, the company missed on its sales guidance. The position retreated on the stock market, though not for long. Its recovery is emblematic of the fervor that the marketplace has for this business, which is why it is a worthy candidate for momentum traders to watch.
The company’s one-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
With the company trading around a billion-dollar market capitalization, it’s very tempting for insiders and the company itself to sell more shares. ExOne fell on news of its latest stock market offering, but it recovered once again. This is a strong sign that this is a company for short-term traders.
And by traders, I’m referring to those willing to execute orders on a moment’s notice or the speculator willing to jump out of the position on any material news.
Investing in hot IPOs is a tough thing to do. It’s difficult to keep up with all the new listings and, of course, Wall Street already knows which ones are in the greatest demand. Therefore, getting an allocation is often impossible with smaller companies.
But even scanning the stock market for new 52-week highs can reveal some growing companies like ExOne. It doesn’t mean that a particular enterprise is worth what the stock market is currently paying; it’s just a trade to see if the momentum can last. (See “Startup Company with Innovative Trend Has Real Staying Power.”)
If you look up ExOne, you’ll quickly discover the other larger players in the 3-D printing business, though there aren’t that many companies in the business with an established presence.
Two larger companies have also been doing well on the stock market. Their valuations are lofty, but then again, they are doing one thing that most of the economy is not—they’re growing significantly.