The last year has been a pretty rough one for industry leading 3D printing company Stratasys and their closest competition, 3D Systems. Their stock prices have been in what could be called a free fall since early last year and it hasn’t let up, even leading into the usually lucrative holidays. While 3D Systems seemed to be taking the brunt of the stock market’s suddenly fickle feelings on 3D printing, Stratasys has been doing its level best to catch up to them. But why exactly is the largest 3D printer manufacturer losing value when several smaller companies are surging in market share and helping the industry move more 3D printers than ever?
January 2016 officially saw Stratasys as the worst performing of the high profile 3D printing stocks when it finished down by over 33%. In comparison, 3D Systems, which also under performed on the S&P 500, was down by about 18% for the month. While there is likely no singular reason for both companies’ ongoing dwindling fortunes, the stark fact is that the two most public faces of 3D printing are likely taking blowback from the entire industry overselling what the technology is capable of. There is little doubt that the 3D printing hype train was being driven by the need to sell 3D printers to new users, which was great for the companies in the short term, but left both Stratasys and 3D Systems looking like they were taking advantage of their customers and holding a surplus of unsold 3D printers.
In the short term the reasons for Stratasys’ sudden dramatic stock drop in January is likely unrelated to their ongoing devaluation and has more to do with the company recently being downgraded by Jefferies and JP Morgan, which was a new blow for the company. While 3D Systems was also downgraded by Jefferies, UBS, and Canaccord, their stock had previously fallen further than Stratasys and just didn’t have as far to drop. But the recent loss of confidence in both companies by Wall Street pros is likely why the drop happened for Stratasys so suddenly.
We also can’t ignore the ongoing fear of a major economic downturn in China contributing to their stock woes. While Stratasys doesn’t have much of a direct presence in China, as with most multi-national corporations their fortunes are tied quite closely with companies who do deal with China. Many of Stratasys’ customers deal directly in the Chinese market and look to lose quite a bit if the bottom starts to fall out of it. While a Chinese recession isn’t yet a sure thing, it has had an overall chilling effect on the market while people hold off on investing until a clearer picture of their economic future can be seen.
Ultimately however, the lack of 3D printer sales that Stratasys was able to generate in 2015 is going to continue to dog them for the rest of the year. At least until the beginning of March when Stratasys has tentatively scheduled their report on its fourth-quarter and full-year 2015 year earnings. Hopefully Stratasys will have predicted their sales drop and compensated for it, because their hardware sales fell by 14% in 2015 which could cause even more stock price drops if the company didn’t make adjustments. Their October restructuring, which saw a reduction in MakerBot staff of 20%, may have been too little too late, or just not enough to stem the loss of sales.
Stratasys needs to either have cut costs enough that profits don’t take a significant dip, or hope that sales picked up in the last quarter of 2015 enough to offset the rest of the year’s losses. It’s going to be really hard to sell their official line, that the downturn in sales is due to the industry growing too quickly, if they under-estimated the drop. Especially while other, smaller and more nimble companies are reporting massive sales increases. Discuss these stock market updates in the Stratasys 3D Printing Stock Plummets forum over at 3DPB.com.