Why 3D Systems Corporation Shares Fell 18% in January

DDD Chart

What: The 3D printing sector continued its losing streak in January. 3D Systems fell more than 18%, faring significantly worse than the S&P 500 . Archrival Stratasys fell more than 33%.

DDD data by YCharts .

So what: January brought several negative developments for 3D Systems investors. For starters, the broader market has been selling off and had its worst start to a year in stock market history. Investors have grown increasingly concerned that China -- a major player in the global economy -- may experience a hard landing, meaning growth may slow more dramatically than expected. Considering China represents a large industrial base, which is a major source of business for many of 3D Systems' largest industrial customers, a hard landing could indirectly affect 3D Systems' business.

Second, numerous Wall Street analysts -- including Canaccord, UBS , and Jefferies -- downgraded their price targets or outlooks on 3D Systems. This reflects a growing consensus of uncertainty among Wall Street pros toward the company's nearer-term prospects.

Third, 3D Systems and Stratasys have both experienced a notable slowdown in customer spending through the first nine months of 2015, which significantly affected their 3D printing hardware sales. Stratasys believes that the industry expanded too quickly and created an oversupply of capacity in the marketplace. Stratasys' management noted that customers may be opting to use up their overcapacity capacity instead of purchasing additional 3D printers.

Reasoning aside, this slowdown has undermined the razor-and-blade aspect of 3D Systems' investment thesis, where 3D printer sales fuel the long-term sales of high-margin consumables and drive longer-term profitability. Ultimately, if 3D Systems doesn't begin to grow its installed base at a healthier pace, it could become a major problem.

Now what: As of Feb. 5, 3D Systems' stock recouped nearly all of its January losses. This short-term volatility isn't likely to change until investors get a better understanding of where 3D Systems' business is heading in the future. Beyond dealing with what appears to be a prolonged slowdown in demand, 3D Systems has to find a new CEO, improve its operational efficiency that's been weighed down by an overly aggressive acquisition strategy, and remain differentiated in an increasingly competitive marketplace.

In other words, there's uncertainty facing 3D Systems internally and externally. How management navigates these challenges should become a major focus for investors.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Why 3D Systems Corporation Shares Fell 18% in January originally appeared on

Steve Heller owns shares of 3D Systems. The Motley Fool recommends 3D Systems and Stratasys. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More