Jim Cramer is voicing his concerns for 3D Systems Corporation (NYSE:DDD), noting the firm’s attempts to sell an additional 5.95 million shares is “just duplicating stock.”
Business model and valuation questioned
Jim Cramer is among the ranks of numerous hedge fund professionals who have questioned the economic model and short term price potential in the once high flying momentum stock. On January 10 ValueWalk reported Dialectic was skeptical of the entire 3D printing category due to valuation. At the time of the post the stock was trading near $90 per share, today it is holding just above $50.
Carlson Capital's Black Diamond Arbitrage Partners fund added 1.3% net fees in the first quarter of 2021, according to a copy of the firm's March 2021 investor update, which ValueWalk has been able to review. Q1 2021 hedge fund letters, conferences and more At the end of the quarter, merger arbitrage investments represented 89% of Read More
At the time Dialectic noted 3D printing stocks are “in the middle of a clear valuation bubble,” saying public hype for the industry has moved valuation past any reasonable expectation that earnings will catch up with the stock price. “This bubble has happened before. It may not pop tomorrow, but if we keep seeing disappointing quarters and an inability to generate profits these stocks will decline. If they trade back to their multiples of a few years ago where they belong, they will decline a lot.” Soon afterwards the stock price began a three month slide, which was covered in ValueWalk noting both positive and negative comments.
In his analysis Jim Cramer notes that 34% of the float in the stock is short and that any recent rally may have been due to shorts unable to find stock to cover, driving up the price. “All that’s over now,” Jim Cramer wrote, pointing out the mountain of available stock after the new share offering.
“Now I am not against three-dimensional printing per se,” he said, taking a different path than other hedge fund managers, who claim the entire category is overvalued. “I think that, for example, Stratasys, Ltd. (NASDAQ:SSYS) has a pretty good three-dimensional-printing business. I was surprised that Hewlett-Packard Company (NYSE:HPQ), for all of its printing superiority, is still not a factor in the sector.”
Jim Cramer attacked on Twitter over 3D
In a somewhat rambling column, Jim Cramer discusses how “this is a real cult stock” and decries being attacked on Twitter in “merciless” fashion. “My critics are always merciless, far worse than most, because I actually read my Twitter feed myself,” he wrote. “I actually kind of enjoy the parrying as long as there is no personal attack. I don’t dignify those.”
As 3D Systems Corporation (NYSE:DDD) floats a stock offering that attempted to raise nearly $315 million to fund further expansion, the original hedge fund critique of the stock continues to ring true: When will earnings be enough to justify the stock price?