3D Printing Firm Scorched in New Short-Seller Report

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As growth plays, it was hard to top 3D printer companies in 2013. For the three companies that were publicly traded for the whole year, shares were up from nearly 100% to nearly 175%. The largest gains were posted by 3D Systems Corp. (NYSE: DDD) but shares have been trending down in the first few weeks of the new year and took a sharp drop on Friday following the release of a new report from short-seller Citron Research.

Citron claims that 3D Systems’ low-cost retail printing system — Cubify — has become a “complete bust” since its introduction early in 2013. The research firm notes that 3D Systems is particularly customer unfriendly, prohibiting returns for any reason, though offering to repair printers at no charge during the warranty period. Comparing customer reviews for the company’s Cube printers to the MakerBot products offered by Stratasys Ltd. (NASDAQ: SSYS), Citron reports that only 2 of 10 Amazon reviews for Cube received 5 stars while more than half of MakerBot’s 48 reviews garnered 5 stars.

Citron also notes that the company has made more than 40 acquisitions over the past three years, paying around a mere 2x revenues, while the company’s own price-to-sales multiple was around 20. Following the announcement of an acquisition in December, 3D Systems’ CEO said:

The stronger our marketplace leadership, the more powerful our economic model becomes. Simply put, a solidified position translates directly to higher revenue, higher profitability and greater earnings power over time, and we are willing to sacrifice short term earnings to get there faster.

That may be a workable strategy, but Citron argues that the low-hanging fruit is gone. Voxeljet AG (NYSE: VJET), which came public in late October, raised $400 million in its IPO, compared with a potential acquisition price by 3D Systems of around $60 million (2x Voxeljet’s revenues at the time).

Here’s how the four main U.S.-listed players in the 3D printing space look going forward.

Since the beginning of the year, 3D Systems has seen its share price drop by about 14% to close at $79.87 on Friday. The stock’s 52-week range is $27.88 to $97.28 and the company’s market cap is $8.21 billion. The consensus target price from Thomson Reuters is around $93.70, yielding a potential upside of 17% on the stock. 3D Systems’ forward P/E ratio is nearly 63 and 17.7% of shares are held short.

Shares of Stratasys are down nearly 8% so far this year, closing at $121.31 on Friday. Stratasys is the second largest 3D printer with a market cap of $5.92 billion and the stock’s 52-week range is $60.20 to $138.10. The consensus target price for the stock is around $143.20 for an upside potential of 18%. The company’s forward P/E ratio is 54.2, and just 5% of shares are held short.

The ExOne Co. (NASDAQ: XONE) lost closed down 7.3% on Friday at $50.59 and the stock is down more than 16% since the beginning of the year. The company’s market cap is $727.84 million and the stock’s 52-week range is $23.50 to $78.80. The consensus price target is around $62.60 for an upside potential of 24%. Some 45% of ExOne’s shares are held short and the company’s forward P/E is over 180.

Voxeljet’s shares tumbled 7.5% on Friday to close at $36.15 in a 52-week range of $19.30 to $70.00. The German company’s market cap is just $361.5 million. The consensus target price on the stock is $52.20 yielding a potential upside of 44%. The stock’s forward multiple is a whopping 361.5.

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