Just last summer, 3D printing stocks were the hottest thing in town. Everyone wanted to know how to trade them and everyone thought they were going to continue to go through the roof.
But alas, they have taken quite the tumble recently. Investors are now thinking twice about buying into these companies that no longer seem to have the appeal that they once did. The last couple of weeks in particular they have been hit hard, as tech and biotech companies have gone out of favor.
“The 3-D-printing industry isn’t revolutionary, it’s evolutionary,” Andrew Left, a notable short seller and chief of Citron Research, told CNBC. “In a hot market like this, you get a good story. It just captures peoples’ imaginations, but in this case it also captures peoples’ dollars.”
Here are just a few examples, via wall street cheat sheet:
- • 3D Systems (DDD) traded at $10 per share at the beginning of 2012, at $40 per share at the beginning of 2013, and it reached a peak of $97 per share. The company earned just $0.44 per share last year.
- • ExOne (XONE) started trading in February of last year at about $30 per share. It reached nearly $80 per share last summer. The company is losing money, and it had sales of about $3 per share last year.
- • Organovo (ONVO) traded at under $2 per share in 2012. It reached a peak of over $13 per share in 2013. The company has no revenues.
- • Voxeljet went public in October of last year at about $25 per share. The stock quickly rose to $70 per share. The company has just a few million in sales despite a valuation that reached $1 billion.
Pretty crazy, right? Profitly guru Super_trades made two massive trades with 3D printing companies. One for a $94,613 profit and another for a $140,122 profit. Those are actually two of his biggest winners (although other trades were even more profitable).
So let’s explain what exactly 3D printing is. A 3D printer is a type of industrial robot that can carry out an additive process under computer control. The technology has actually been around since the 1980’s, but these printers were not widely available until 2010, hence why they never really had much attention until recently.
What is 3D printing technology used for? Well, the big uses are prototyping and distributed manufacturing with applications in areas such as architecture, construction, industrial design, automotive, aerospace, military, engineering, dental and medical industries, biotech, fashion, footwear, jewelry, eyewear, education, geographic information systems, food, and many other fields, according to Wikipedia. 3D printing is a process of making a three-dimensional solid object of virtually any shape from a digital model. 3D printing is achieved using an additive process, where successive layers of material are laid down in different shapes. 3D printing is also considered distinct from traditional machining techniques, which mostly rely on the removal of material by methods such as cutting or drilling (subtractive processes).
Here is a video example of a 3D printer in action: https://www.youtube.com/watch?v=8aghzpO_UZE
So last summer, investors believed 3D printers were going to revolutionize manufacturing, as these companies had hopes of printing things like car parts, shoes, etc. Now investors are more weary, and the stock prices reflect that.
We are not saying whether you should or should not buy a 3D printing stock, we are just urging caution like we do with any stock. When people get carried away, they don’t look at things like earnings, sales, expenses, or growth prospects. They just view the companies as a “must own.”
You need to look for the companies that have more than just a story with hype, look for secured patents that aren’t expiring in the near future or pending and perhaps wait until the stock goes down a bit and then holds a support level so you have a good chance of “buying on the dip” especially since these stocks are known for their volatility.
So essentially, the upward run of 3D printing stocks can largely be attributed to hype rather than to an imminent revolution in consumer technology.
3D printer maker Voxeljet saw its stock price rally fivefold to $70 a share about a month after its October initial public offering. But the company sold 3 million shares for $15 each just last week, according to the WSJ.
Through last Thursday’s close, their stock had plunged 74% from its Nov. 18 post-IPO high. By some measures, the pricing was among the weakest for U.S.-listed follow-on offerings this year. The $15 price is 42% below Voxeljet’s close on March 27, the day it registered to sell the shares. Ouch. This is the perfect examples of why you need to be careful trading these stocks. It is also one of the biggest reasons you need to follow the gurus and learn how to trade before jumping right in to the stock market. You can be easily burned if you are not properly prepared.