Citron Research, a firm best known for its bearish reports on a variety of names, found its latest target in the 3D printing industry, focusing in on the relatively new IPO of Voxeljet (VJET). In a brutal takedown of the company, Citron questioned how the firm was even public, and declared it to have ‘possibly the worst piece of small print nonsense ever seen in a quarterly report’.
This scorn centered around the company’s latest earnings report and that its $4.76 million in revenues were driven by just three 3D printing machine sales. Furthermore, their research showed that the company was giving loans to buyers of the 3D printers and then booking that as revenues. Without this, the company would have had $0 in system sales for its first publicly traded quarter, a disaster that pretty much everyone overlooked until now.
Shares of VJET cratered after the report as panicked investors sold off their holdings. Volume was roughly six times normal, while VJET fell nearly 33% on the session thanks to these gloomy facts being brought to light.
However, the pain didn’t stop in shares of VJET, as others in the 3D printing space were also hit hard by the news, including the following companies:
So while the Citron report might have been focused on the questionable policies of VJET, this concern trickled down into the rest of the space as well. Investors are clearly starting to question if these other 3D printing companies can also justify their lofty valuations at this time.
After all, companies in this corner of the market are generally losing money, and they are trading at absurd multiples when it comes to Price to Sales and Price to Cash Flow ratios.
|DDD- Zacks Rank #3 (Hold)||16.7||76.5|
|SSYS- Zacks Rank #3 (Hold)||12.7||64.8|
|XONE- Zacks Rank #2 (Buy)||20.0||NA|
On the other hand, revenue growth has been pretty strong across this space, so there is definitely plenty of reason to believe that these companies can grow their way to better health. This is already being reflected in analyst earnings expectations further down the road for this space:
|Stock||2012 Earnings (actual)||2013 Earnings (est)||2014 Earnings (est)|
|DDD- Zacks Rank #3 (Hold)||$0.78/share||$0.85/share||$1.11/share|
|SSYS- Zacks Rank #3 (Hold)||$0.86/share||$-0.63/share||$0.97/share|
|XONE- Zacks Rank #2 (Buy)||$-1.16/share||$-0.12/share||$0.43/share|
Personally, I think that many of the 3D printing stocks were due for a correction, but that they still have bright long-term futures for those that can wait out some heavy volatility. However, if the rest of the high flyers and their performances as of late is any guide, we may see some more pain in the 3D printing space before gains come back to this market, suggesting that you might want to wait a little longer before jumping back into this market.
But what do you think?
Is the Citron report on VJET a sign that it is time to abandon 3D printing stocks entirely, or is this a great time to get in on the space for a discount?
Let us know in the comments section below!
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