Shocking Results At ExOne

| About: ExOne (XONE)

As warned back after the massive IPO gains, ExOne Company (NASDAQ:XONE) was set up for a potentially rocky public market experience. The company only reported $28.7 million in revenue for all of 2012 and had a limited experience of actually selling 3D printers.

The 3D industrial printer company focuses on manufacturing and selling 3D printing machines in fact didn't even sell a machine in Q1 of 2012.

The stock surged to $49 prior to the earnings report after initially pricing the offering at $18 providing those initial investors with over a 170% gain in roughly four months. The Q113 numbers though were shockingly disappointing as the company yet again missed estimates blaming European weakness.

Q1 2013 Highlights

The company provided the following highlights for Q1 2013:

  • Revenue increased by $5.2M to $7.9M; five machines sold in the quarter.
  • 3D printed parts and material revenue increased to $3.7M from $2.7M last year, up 47%.
  • Net loss of $1.9M was higher than a net loss of $1.5M during the same period last year.
  • Strong balance sheet with $71.1M in cash to support growth plans.

ExOne reported a loss of $0.20 that greatly exceeded the analyst estimates for a $0.08 loss. Actual revenue was also lower than the $8.6M estimate. The company placed the blame on the disappointing numbers to weakness in Europe. Typically the market doesn't look favorably at a fast growth stock that faces cyclical issues. Especially considering that big brethren in the 3D business didn't face the same issues.

2013 Guidance

The company kept the following numbers for 2013:

  • The company estimates full year revenue to be in a range of $48M to $52M with approximately two-thirds of revenue expected to fall in the latter half of the year.
  • Gross margins for the year are expected in the 42% to 46% range.
  • Operating expenses are expected to be in the range of $18M to $21M.
  • Company plans to launch two to three additional PSCs during the second half of 2013.

The problem with the maintained guidance is that analysts had ramped up the expectations from revenue of $49M when the company provided the original guidance at the time of the Q412 earnings report. Analysts now expect more than $53M that might be pressing for ExOne to reach.

With the majority of the revenue to be reported in the second half of the year, analysts have modeled over $16M for Q3 and $18M for Q4. These numbers might garner some investor interest as the end of the year hits, but only if the stock drops from here.

Stock Valuation

With a market cap of $539M, the stock remains pricey even after a selloff following the earnings miss. Even with the higher analyst estimates on revenue, the stock continues to trade at 10x revenue expectations. As a comparison market leaders 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS) trade at slightly lower revenue estimates for 2013. With ExOne revenue growth expected to more than double the 2014 growth rates of both 3D Systems and Stratasys, ExOne is probably trading within an acceptable range.

Since the IPO of ExOne, it has dramatically exceeded the returns of the group. The two big stocks spent most of that time with negative returns until just recently. The likelihood exists that ExOne will revert back to the mean of the group.

XONE Chart

XONE data by YCharts


Based on the pricey multiples and inability to beat estimates, no reason exists to continue chasing ExOne at these levels. Stratasys probably provides the best investment option at this point as the company progresses on integrating the Objet merger.

As typical of high growth areas, the stocks with the first mover advantage and market share tends to control the market. Until ExOne proves otherwise, it is impossible to know whether the weakness was more competitive based. The sector remains too hot to miss numbers by what amounts to only one machine, but one machine nevertheless is a huge disappointment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.