3D Systems stock jumped nearly 25% on Monday after the company reported surprisingly strong fourth-quarter results. But the stock fell 12.3% on Tuesday when analysts cautioned that the rally was excessive given the lack of strong demand and falling printer sales. 3D Systems shares have gained about 40% year-to-date, outperforming the broader S&P 500 by a distance.
3D Systems likely to see negative sales performance
JPMorgan analyst Paul Coster downgraded the stock from Neutral to Underweight. He also reduced the price objective from $10 to $9. JPMorgan said investors might be pricing in “unrealistic expectations of a V-shaped recovery.” The stock has shot up about 40% year-to-date, which seems way too high given the continued uncertainty surrounding the 3D printing industry.
Gabelli & Co’s Hendi Susanto also downgraded the stock from Buy to Hold. Susanto told investors that the Rock Hill-based company will likely see negative sales performance in 2016 due to macroeconomic challenges, longer sales cycles, weak investment in capital equipment, and low market visibility. Meanwhile, Goldman Sachs and Jefferies maintained their Neutral ratings on the stock.
On Monday, 3D Systems reported Q4 revenue of $183.4 million, a 2% YoY decline. Revenues were in line with its preliminary outlook. But earnings came in at 19 cents per share, beating the Wall Street projections of just 6 cents in EPS. The company took a goodwill and intangible assets write-down of $537.2 million. As a result, 3D Systems reported a GAAP loss of $596.4 million.
Company to undertake an ‘extensive review’
3D Systems has exited the consumer business to focus on industrial and enterprise customers. During the conference call on Monday, chief executive Andrew Johnson offered upbeat commentary regarding demand from customers in the aerospace, automobile, and healthcare industries. Johnson said the company had received “some large orders in healthcare.”
The company recently opened a new facility in Denver that is the central hub and launching point of healthcare-related software and hardware. 3D Systems told investors that it would undertake an “extensive review” of its business and strategy. It has fueled speculations that the company might cut headcounts and streamline some businesses.