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Contrarian, macro, hedge fund manager, Emerging Markets
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Summary

  • 3D Printing stocks have sold off hard recently as 3D systems is down over 50% from highs.
  • Even after sell off, company is still overvalued.
  • Shorter-term traders can benefit from countertrend rally, but longer-term investors need to wait for stock to fall below $30 per share.

The recent sell off in the speculative tech sector has hit the 3D printing stocks hard. 3D Systems (NYSE:DDD) is down over 50% from its January 3rd high of $97 to its current price at $47.64. Other names in the industry such as Stratasys (NASDAQ:SSYS) and the ExOne (NASDAQ:XONE) company are down 34% and 52% over the same time period.

Despite the sell off, the stock is not a value proposition at current prices. The stock still has a P/E of 110.8. With earnings expected to grow at 23%, investors would be overpaying for growth at current prices as the stock has a 4.58 PEG ratio. As this market grows, the risk of manufacturing companies such as HP, General Electric, Boeing, or Microsoft entering the space can be a long-term threat to future profitability. I believe 3D printing has one of the highest ceilings amongst any emerging technology, but it seemed like investors were getting ahead of themselves the past two years.

I believe 3D printing has one of the highest ceilings amongst any emerging technology, but it seemed like investors were getting ahead of themselves the past two years. For short-term traders, there may be an opportunity to buy this dip upon technical confirmation, but long-term investors should wait. The fair market value for 3D Systems based on a P/E ratio equaled to two times earnings growth would be $20 per share. This assumes earnings do not decline and meet growth expectations. However, earnings beats in the future can increase this estimate.

For more on my analysis on 3D Systems watch the video below. It includes more fundamental quick takes plus technical analysis of the stock.

Source: 3D Systems: Bullish Or Bearish?