When Voxeljet AG (ADR) (NYSE:VJET) released its first quarterly report last week, investors were initially impressed that the small 3D printer manufacturers had managed to post EPS profits, even small ones, right out of the gate. Then they noticed that the $4.76 million in revenue was almost completely driven by three $1 million unit sales, and that all three involved some kind of in-house financing. What had looked like a great start suddenly looked like a ruse and the Securities and Exchange Commission asked for clarification. With all the facts, the quarterly report is less damning, but Citi analyst Kenneth Wong rates the stock as high risk.

Voxeljet VJET

Voxeljet sales financing

While it’s true that Voxeljet AG (ADR) (NYSE:VJET) financed all three of its sales last quarter, it hasn’t had to finance any of the 49 sales that preceded them in the company’s history. One of these three deals was basically a favor to an existing client that needed to expand capacity quickly, and Voxeljet only expects to offer financing for one of the 7 deals it currently has in the works.

“While we acknowledge these transactions add elevated collections risk, Voxeljet has never had a customer default and 1 of the 3 loans has already been repaid. After a 30% pullback on 11/20, we believe the concerns around vendor financing are priced into the stock,” writes Wong, who has set a price target of $55 compared to a current stock price of $39. Considering all of the potential downsides, he says that the risk/reward isn’t very compelling.

Tech stocks have higher risk

Tech stocks have a tendency to be higher risk than more established sectors, and 3D printing is still a very new industry. With a reliance on large, expensive sales the company could have granular earning results (with seemingly big changes determined by whether one or two sales are counted as this quarter or next), and it has yet to face any serious competition. Right now the 3D printing sector is composed mostly of small companies with niche business models, but as that changes Wong expects to see “significantly greater product overlap creating a more intense competitive environment,” in addition to the IP lawsuits that are so common in the PC and mobile markets.