U.S. Markets closed

Why 3D Systems Stock Plunged 22% in August

Beth McKenna, The Motley Fool

What happened

Shares of 3D Systems (NYSE: DDD) plummeted 22.4% in August, according to data from S&P Global Market Intelligence. The stock is down 32% in 2019 through Sept. 3. 

For context, shares of main rival Stratasys declined 14.6% in August, so it was a bad month for the leading pure-play 3D printing stocks. However, Stratasys stock is still up 30.2% so far this year. The S&P 500, including dividends, fell 1.6% in August and has returned 17.5% in 2019. 

White paper airplane pointing about 45 degrees downward on a light-blue graph background.

Image source: Getty Images.

So what

We can attribute 3D Systems stock's poor performance last month largely to the company's Aug. 7 release of its second-quarter results, which were worse on the top line than Wall Street and many investors were expecting. Shares plunged 14.1% on the day following the release.

In Q2, 3D Systems' revenue fell 10.9% year over year to $157.3 million, led by a 27% drop in 3D printer sales. Adjusted for one-time items, the South Carolina-based company's bottom line came in at breakeven, down from $0.06 in the year-ago period. Wall Street analysts had been looking for an adjusted loss of $0.04 per share on revenue of $160.7 million. So, 3D Systems beat the profit consensus estimate, but fell short on the top line. 

On the positive side, the company showed a sequential improvement on the cash generation front. In the second quarter, it generated $18.7 million in cash from operations, whereas in the first quarter it gobbled up $15.2 million of cash in its operations.

Now what

3D Systems' revenue drop accelerated sequentially in the second quarter and its adjusted bottom line worsened on a year-over-year basis. Unless and until the company demonstrates some solid signs of a turnaround, most investors should wait on the sidelines.

More From The Motley Fool

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com