Momentum stocks aren’t so great when their top line numbers start to miss. It’s way too early to overreact, but the momo crowd always does. Should provide for a nice (re)entry point for me sometime in the next few days/weeks.
DDD pre-announced negatively this morning, stock down 20%
Haven’t had a chance to fully read the release/news. However, looking solely at P/S this this has truly went off a cliff. EPS is lower than estimates, whereas rev is in-line. This could merrit a buying opportunity. 3-d printers are absolute game changers in 5-10 years. Disclaimer: no position
I bought some DDD, SSYS, XONE, and more AMAVF a couple weeks ago on the dip. It was the first of three installments. After I read the news this morning I knew the market was going to way overreact so I bought more about five minutes into trading. Great entry point for those looking.
The news wasn’t even bad. The 3D printers are starting to spend more on R&D and CapEx so they’re forecasting lower profits. As a long term investor, I see this as very good news.
Why did you buy the other 3-D printing companies as well? What was your view about DDD vs. SSYS, XONE, etc.? No VJET?
I think the pre-announce this morning was pretty bad. Top-line for 2013-2014 in-line but 2014 EPS guidance of $0.73-0.85 was way below consensus of $1.28. Are you not concerned that the consumer opportunity could be overrated and that material GM’s are unsustainable? What has your research told you about these two issues? I would in fact argue that the pre-announce by DDD is probably bad news for the comp set too because to remain competitive against the #2 player in the space, they too will likely have to invest more heavily in marketing and R&D.
Also, have you talked to your trader about buying activity in DDD since it gapped down 27% at the open? It has made a nice recovery over the last few hours, but personally I’m pretty sure these stocks are going to head lower instead of higher. MoMo’s are largely out and much of the buying back in after the weak open was short covering + positive tape since lunchtime.
Love to hear thoughts from anyone that’s still bullish on DDD at these levels, and what else would have to happen to make you lose confidence on the long side.
As a general rule I like industry leaders and DDD and SSYS hold that title in the realm of 3D printing. XONE is interesting because they cater to the industrial/prototyping demand for additive manufacturing, which I think is the near-term opportunity. VJET…There’s just nothing there that gets me excited. I probably should get to know the company better, but I’m not in any hurry.
As mentioned above, I think sales over the short-medium term will be dominated by industrial demand. The consumer market will come around but it’s still a ways off. The 3D printing companies trade on P/S so it’s the top line and their backlog I look at closely. Both are strong. Even the bears don’t doubt a 30% growth rate. And that’s not for the next 1 or 3 years. We’re talking about 30% a year for the next 15 years. That’s pretty damn amazing. Of course, just like any new technology, some of these companies won’t make it. Those that make heavy investments in R&D - it seems to me - have the best chance to thrive. Put another way, as long as revenue continues to grow, I couldn’t care less about earnings.
I am my trader. This is my PA I’m talking about. When I was first interested in 3D printing I looked at it as a momentum play, but as I did my research on the sector I realized this is something else entirely. 3D printing is a paradigm shift. This went from me turning a quick buck to something I plan on holding on to for years. I look at these opportunities to add to my position.
If Whitney Tilson suddenly got bullish I’d be worried. That asshat sucks at shorting. I’ll gladly ride the gap up when he has to cover.
Nicely done! I hereby dub thee: “the Oracle of AF” 
LOL, thanks bchad. One other thing that “The Oracle” and I have in common is that we don’t talk about our short book. How we’re different is that he gave up on shorting a long time ago, while I’m still at it. Only time will tell if I give up shorting, but so far so good for the time being.
STL, that the bears don’t doubt the top-line growth tells me that the debate on DDD / SYSS is about something else, and that’s earnings power. Think about what’s happening on pricing in the space and where margins are headed, especially in consumer grade printers and materials. This isn’t going to be the first time these companies guide down: expectations for margins in these areas are waaaay too high right now. That is why people care about EPS this time around: because if a company is valued at 10x EV/sales, it better damn well show that it has a sustainable moat (e.g. Amazon) or prove that it has expanding earnings power. In “AF speak,” DDD took a hacksaw to its numbers this morning and I think actual EPS in 2014 could be even lower than guidance.
That DDD actually took down earnings guidance in 3Q13 when nobody really cared (actually, that’s not totally true because stock gapped down 7-8% at the open only to be up 1-2% after the close due to short covering), and this morning they pre-announced and everyone cared, tells me that the shareholder base in DDD is vastly different today vs. three months ago. And that would scare me if I were still long…which I’m not. Am I short? Maybe.
^You’re looking at the space differently than I am. You’re taking the perspective of a momo investor, which make up a huge portion of the 3D printer’s shareholders. To a momo investor, bottom line deceleration (and to a lesser extent, margin compression) are huge red flags. Momos want to ride the wave and bail as soon as they think the party’s over.
I’m fine with the volatility the momo crowd brings and I fully expect days like today to happen several more times over the next few years. I just hope I have cash on hand like I did today to buy the dips.
Catching a secular shift is a rare opportunity. I may be wrong, but I’m betting 3D printing is here to stay and will revolutionize damn near everything. The other huge shift is US energy independence. I need to get more into that as well.
I suspect Numi would take umbrage at being called a “momo investor.” Momentum can affect trade timing without implying that fundamentals are unimportant.
Thank you for providing an opportunity to use the word “umbrage.” Some words need to be used now and then, just for practice.
I think it’s important to recognize who the players are in this space, and it’s dominated by momentum investors. That can mean many different things, btw. I’m not talking about a guy that’s just looking at relative price strength and buying based on nothing else. There are plenty of fundamental momo investors. They look for rapidly expanding business models - accelerating growth; and that can be mixed with traditional momentum technical indicators.
The point is, valuation doesn’t drive the activity of these investors. On the surface, both SSYS and DDD basically said they’re not going to be any more profitable next year than they were this year. To the above mentioned crowd this can raise some eyebrows. To the momo guys that put a lot of weight on earnings growth, that’s a red flag and they bail. To the guys watching the technicals, they bail as soon as they see the first momo guys bail. Then you’re left with the traditional longer-term growth managers, momo guys that pay more attention to the top line, and guys like me that are thinking 5-10 years out, not quarter to quarter.
It’s good to know who your fellow longs are. I can set my expectations accordingly.
Good point. I just know that Numi takes fundamentals seriously, so the suggestion that he just follows price trends didn’t sound right.
As for whether momentum or technicals is a sensible factor to incorporate into one’s analysis or not is a question that’s up-for-grabs. Being early isn’t all that much different from being wrong, so if momentum adds information that makes you right (and able to profit from being right), is it not a sensible thing to incorporate?
I agree that having some sense of who the longs and shorts are, and what is driving the behavior is helpful for figuring out whether a change in trend is a reason to bail or a reason to accumulate more. I’ve been trying to figure out a sensible model for figuring out these kinds of issues, but haven’t gotten very far (other than just trying to use a momentum factor in models).
According to Barra (for those lucky enough to be blessed with factor analysis) exposure to momentum has added value about 70% of the time over the last 30 years. Honestly though, I don’t really like that stat because, as I mentioned above, momentum can mean a lot of different things so what Barra considers momentum to be isn’t necessarily what the mid growth manager at Brandywine thinks it to be.
Well, presumably it’s Barra’s own momentum factor that they are using. That data point is as much designed to sell Barra data subscriptions as anything else.
Do you have a URL for that statistic? The skew of the momentum factor is important in a statistic like that.
Nope, it’s proprietary. We use it to sell our funds that have a momentum tilt.
Don’t look now but DDD is at $56 and has a long ways to go down. The helium is coming out of the 3-D printing hot air balloon. Bulls beware! Consensus expectations around longer-term margins are still way too high.
Not so sure about that. I’ve been patiently waiting for it to dip down to ~$50 to buy. Lots of negative press (mainly Seeking Alpha) around DDD and the others. The quarterly results and outlook didn’t have any surprises. The big question mark is if they can effectively manage all the companies they’ve bought over the last couple years. That’s why I put them last on my list of 3D printers, but if someone said I had to buy or sell today, I’d go long.
Tilson is going to get squeezed like he does every other time.
The short squeeze happened from $60 to $80 in the two weeks ahead of the 4Q13 call. That was pretty ruthless for the shorts, I admit. However, since then cost of borrow, along with the stock price, has come way down because institutions are unloading. And, I don’t want to be long DDD because I don’t want the stock to unload on me if you know what I’m sayin’.
Depends on your time frame, but I think a good long-term entry point is close at hand, and not just for DDD. XONE has gotten the worst of it. I may take a small bite of that any day now. SSYS has held up fairly well but if it dips to around ~$105 I’ll pick some up. And AMAVF, after holding up really well, finally dropped over the last few weeks. I did pick some up at $29 last week. That’s a pretty good deal for what they have going on.
Revenue, pipeline, and earnings will all pick up over the course of the next year (and several there after). I’m happy to buy the dips. What I need to figure out is what to do about HPQ…
my boy told me there is a 3d prinitng convention in nyc, if anyone goes please share
http://3dprintingindustry.com/venue/javits-convention-center/