3D printers are expected to be all the rage at the CES gadget trade show in Las Vegas this week. But the rendering of objects in three dimensions isn't just something that geeks love. Investors are starting to get infatuated as well.
Shares of 3D Systems (DDD), which makes the popular Cube printer, were up more than 4% Monday. The stock is off to a red hot start to 2013, already having surged nearly 15%. And that follows a torrid 2012 as well.
3D Systems is hardly the only company in what's starting to become a crowded field. But it's one of only a few major publicly traded pure plays in the sector right now. Stratysys (SSYS) and France's Dassault Systems (DASTY) are two others with significant exposure to the market.
The most prominent company in 3D printing, MakerBot, is not public. It, along with 3D Systems, will be presenting their latest products at CES this week. Traders on StockTwits were wondering though if 3D printing is a legitimate growth business or the latest short-lived tech fad.
Investors probably do need to be a bit nervous. While 3D Systems is profitable -- so it least it's not a money-losing company being valued on sales or hope -- shares are trading for about 40 times 2013 profit forecasts. That's obviously expensive. And if the company does wind up looking to take advantage of its soaring stock price to sell more shares in a secondary offering, that could dilute the value of current shareholders' stakes.
Still, some investors see a lot of promise for the company ... or at the very least, the stock.
It's possible that the stock could keep rallying this week as investors continue to focus on new products from CES. But keep in mind that MakerBot and others are presenting too. If rival 3D printers get more buzz, that could be a negative for 3D Systems.
As for earnings, looks like latest results won't be out until February. So investors have more time to wait for that. The company is presenting at an investment conference held by investment bank Needham next week though. So there could be market-moving news there.
And yes, the stock could be susceptible to a squeeze considering that 42.5% of the available shares were being held short as of mid-December. But that's an extremely high short interest ratio. Sure, those shorts may have to rush to cover if the stock keeps going up. But remember that there's a reason many bearish short sellers have focused on the stock in the first place.
But it looks like many traders remain excited, especially as the company continues to make acquisitions to help consolidate what remains a fragmented industry. Last week, 3D Systems bought a company called Geomagic.
Interesting point. But is that a good thing or a bad thing? Cisco Systems (CSCO) is still the leader in its industry. But one too many acquisitions, coupled with an unsustainable valuation, took a toll on its stock price.
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