Since the show opened on January 8, SSYS is down by 18% while DDD is basically flat.
I personally bought into DDD last November, paying $47.10 per share. With the recent "collapse" in the stock I'm now only ahead $1,200 on that investment. Oh noes.
Stratasys offers some reason to be concerned. The company represents a merger of the old Stratasys Corp. with Objet, an Israeli company. These companies were the second-and-third leading players in the market before the merger. After they're done they'll be number one.
But how well are they doing at that? Until the company's March report, we don't really know. Analysts are expecting earnings of 38 cents/share, which at its January highs of near $90/share looks steep. At the more recent price of $68, the expected earnings of $2.03/share come to a more reasonable multiple of about 33. What they're really buying is the top-line growth, which is expected to double, year-over-year, and keep rising from there.
So the recent correction in the stock is probably just that, a correction. Corrections happen. It still looks like it will come good, but note that it doesn't play in the low end of the market. Instead, Stratasys is an industrial company, focused on working a broad line of materials for customers who can spend six-figures for a production-quality machine.
DDD does compete in this consumer market, and at CES it introduced a line called CubeX, priced at roughly $2,500 to $4,000. It has a "build volume" of over 300 cubic inches - it can deliver a final product nearly a foot on each "side" - and the high end can produce an object "as big as a basketball." (A basketball was shown on its "build platform" to demonstrate.)
Not bad, but Makerbot stole some of that thunder with a $2,800 machine whose build plane is smaller, but whose heritage is squarely in the open source mainstream and which has a better connection to consumer channels. Some analysts may have also been surprised by the "deluge" of products on offer for this new "maker" market - a full two dozen in all.
But this reminds an old observer of the late 1970s, when an open operating system called CP/M created literally dozens of little PC companies. Consolidation followed a few years later, with IBM's launch of its PC, and the entry of many Japanese companies into that market.
Still, there's more to this market than the consumer end. With its fairly full line of printers 3D is closer to the position of Hewlett-Packard (HPQ) in that 1970s PC market, only it's aware of the opportunity and fully participating - HP famously rejected the Apple II.
Investors were probably spooked on both issues by a call from Citron Research which called the area "hyped." But Citron is run by a short, Andrew Left, and it's a financial company rather than a tech analyst. In other words, the negative call was issued by someone who is selling something.
Both these shares were due for a pullback. But when you have a fast-growing market, events like this are in fact opportunities, a chance to double-down. We should thank Mr. Left. It is likely these stocks were getting ahead of themselves, but their prospects remain fundamentally bright.
Analyst estimates for DDD earnings in 2013 average $1.58/share. At its current price of below $60/share, you're looking at a forward earnings estimate of 38.6. High, yes, but you're also talking about a company growing at 25%/year, with trusted management. It's not unreasonable.
Disclosure: I am long DDD.