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Why 3D Systems Corporation's Shares Plunged in July and Popped in August

Travis Hoium, The Motley Fool

What happened 

Shares of 3D printer manufacturer 3D Systems Corporation (NYSE: DDD) fell 11.9% in July, according to data provided by S&P Global Market Intelligence, as sentiment surrounding the company fell before earnings. But shares more than recovered those losses, gaining 47.6% in the first eight days of August.

So what 

Most of the drop in July came on July 24, when the Trump Administration decided to allow parts for 3D printed guns to be sold. The reaction was negative for 3D printer stocks because it could bring unwanted scrutiny onto the industry. But that was speculation and not driven by any fundamental change in the business.

A blue cup being eD printed.

Image source: Getty Images.

What sent shares higher in August was second-quarter 2018 results, which is a fundamental driver of shareholder value long term. Revenue was up 10.7% to $176.6 million and adjusted net income dropped 28% to $6.2 million, or $0.06 per share. But the real surprise was that the figures easily beat analyst expectations for $165.9 million in revenue and earnings of $0.01 per share. 

Now what 

The past month has been an example of how volatile the 3D printing industry can be. Shares will rise or fall on speculation and earnings will often bring expectations back in line with reality. 3D Systems has struggled to maintain growth over the past few years, so I would take the second quarter's results with a bit of a grain of salt. But it's positive that 3D printer volume increased 37% in the quarter and healthcare and manufacturing are growing as business segments. If all goes well, the momentum could be just beginning for 3D Systems.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool recommends 3D Systems. The Motley Fool has a disclosure policy.