Looking for volatility? Stick with 3D (three-dimensional) printer stocks. While most continue to exude upward price momentum, valuations are off the charts and the action can only be described as “gut-wrenching.”
Stratasys Ltd. (SSYS) is a company we looked at back in November. Based out of Eden Prairie, Minnesota, Stratasys is one of the leading manufacturers of 3D printers. (See “In Spite of Hype, New Tech Sector Not a Fad.”)
The company’s share price is up six-fold since October of 2011, but it recently experienced its first blip in expectations. The stock dropped $15.00 a share, or about 11.5%, after reporting a 2014 earnings outlook slightly below existing consensus.
Still, this is very much a growth story, and it’s likely the company will continue to be a hot commodity on the stock market. Revenues for 2014 are expected to grow by a minimum of 25% organically.
But like many enterprises in high-growth mode, Stratasys is investing heavily in its business, hiring new sales people and spending on marketing. Combined with higher costs for research and development, total operating expenses this year are expected to rise considerably. The Street sold the position on the day of the announcement, exacerbated by the company’s extremely high valuation.
Almost twice as large as Stratasys is Rock Hill, South Carolina-based 3D Systems Corporation (DDD). This company has been on a tear, up by more than 100% on the stock market since this time last year.
The Street expects 3D Systems to grow its sales by 45% this year and another 30% next year. Earnings aren’t forecast to grow as quickly as sales for the same reason as Stratasys: these companies are investing heavily in future operations.
The ExOne Company (XONE) is a position I’ve looked at several times before in these pages. After a major price retrenchment in September of last year, the stock’s been fighting higher, slowly coming closer to its all-time record high.
This company is expected to become profitable this year on a 68% gain in sales over 2012. 2014 total sales are currently expected to grow another 51%, with a Wall Street median price target of $72.00 per share.
In terms of extreme investor enthusiasm, the valuation prize goes to one company—voxeljet AG (VJET), which is a German 3D printer manufacturer that listed on the NYSE last October. Selling 6.5 million shares at $13.00 each, the stock opened around $23.00, and then proceeded to hit $70.00 before retrenching to $35.00.
Its stock price currently sits just above $40.00. Total sales this fiscal year are expected to grow by more than 50% to approximately $24.5 million. With a market capitalization of more than $400 million on the expectation of break-even earnings results, this valuation is extreme.
But in hot markets, extreme valuations are nothing new. The marketplace always wants to own the fastest-growing companies, and price momentum feeds off of itself.
When interest rates are low and liquidity is strong, momentum trades can pay off nicely. The stock market and how you’re positioned is all relative. Being profitable is most important.
3D printer stocks are likely to continue their price momentum this year, and they will be one of the top speculative sectors for the next several years.