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3D Systems Corporation Message Board

  • rayank7777777 rayank7777777 Jan 7, 2014 7:13 AM Flag

    SA article predicts 80% drop?

    SA article predicts 80% drop? http://seekingalpha.com/article/1930501-3-Stocks-Which-Could-Fall-80-percent-In-2014?source=yahoo

    "Lastly, I think 3D Systems (DDD) shares are ripe for a significant decline after rocketing +160% during 2013. There are few things which have captured the market's attention like 3D printing. DDD Systems is believed to be the 800 lb. gorilla of the 3D printing industry. With $510 million in revenue expected for 2013, 3D systems trades at 19x revenue and nearly 100x operating profit. Multiples like this imply: 1) sustained period of super-normal growth for at least a decade (2) maintaining and/or increasing operating margins for the foreseeable future (3) a business with a strong moat/stable competitive environment. I have concerns regarding all three of these points. Firstly, as I noted above, 3D printing will prove to be a highly cyclical industry given the industry given that it sells mainly to industrial companies with highly variable capital expenditure budgets. Growth can slow for industry or company specific reasons including increased competition and new technologies super-ceding capabilities of existing players like 3D systems. Further, I think the company's roll-up strategy will end up leading to many key employees from acquired companies leaving to start their own new 3D printing companies leading to new competitors with strong industry knowledge and customer relationships.

    Let's explore these concerns. While I don't see any impropriety in the company's accounting methodology, R&D understated. In 2012, 3D systems spent just $23.5 million or 6.6% of revenue on R&D (just over 10% looking at R&D divided by printer + consumable sales). This certainly doesn't sound like an insurmountable obstacle for competitors. However, 3D Systems has made several acquisitions, acquiring technology in the process. However, this isn't captured in the income statement (though it does siphon off cash flow, the only thing that really matters in the va

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