Why Is 3D Systems Skyrocketing?

3D Systems Corporation (NYSE: DDD) has skyrocketed Thursday afternoon despite reporting an earnings miss.

The 3D printing company reported a Q2 EPS of $0.03, which was well below the Street estimate of $0.08. Sales arrived at $170.5 million versus $171.7 million.

Wall Street didn't seem to care about the miss; shares were up more than 17 percent as of 3:17 p.m. EST.

"They're still growing the top line," former hedge fund manager Cody Willard told Benzinga. "The top line was up. There's still a growth trajectory for the company itself. Margins are not good but the fact that they're growing is a positive."

Related Link: FDA Approves The First 3D Printed Drug Product

Willard may have justified the spike, but he was not particularly impressed with 3D Systems' overall performance.

"The stock is down [more than 80] percent in the last 18 months," said Willard. "We're talking about a company that was worth $12 billion just 500 days ago now being worth $1.5 billion. However bad the business has been for the last two or three quarters, that has clearly been priced into the stock."

One question still remains: Is there a business going forward?

"The valuations at these levels…they're basically discounting that this company is never going to grow and that it will eventually go to zero," said Willard. "And if the company can survive, it's going back to $50."

'Most Loved, Hottest, Crazily Valued Group Of Stocks'

Sean Udall, CIO of Quantum Trading Strategies and author of "The TechStrat Report," told Benzinga that 3D printing was once the "most loved, hottest, crazily valued group of stocks."

"[It was] basically a bubble," he said. "What we've seen, about a year and a quarter [later], the exact opposite of the trade. The stocks have gone from being completely, crazily overvalued to…I could argue that they're [now] undervalued."

Udall referred to the $20–$23 range as a "respectable low point" for 3D Systems.

"The whole move from $22 to $11 was almost a straight line torture test," said Udall. He noted that Stratasys, Ltd. (NASDAQ: SSYS) has been upgraded by at least two analysts.

"I think the theory is…maybe some of the guys who upgraded Stratasys will upgrade 3D Systems," Udall explained.

Investors shouldn't get too excited, however. Udall said the spike is not a big deal given the overall declines.

"Some people call this a dead cat bounce, if they don't believe in the name," Udall concluded. "Some people call this a relief rally."

'The Next BlackBerry'

For now, 3D Systems' future remains a mystery.

"Is 3D Systems the new BlackBerry?" Willard questioned. "Is this thing going to sit here between $8 and $12 for the next three years? Or is it the next Sprint and it's just going to fade away into a penny stock?"

Willard said that Stratasys remains the "best in class" for those who are still interested in 3D printing.

"Their customer base [consists of] large enterprises and corporations that can invest big-time into the Stratasys platform," said Willard. "Then they get locked in over the long term, whereas 3D Systems is more of a retail-oriented play. There might be more growth in enterprise anyway, but retail…there's just not a market there that's sustainable yet, and we don't know if there will be."

Willard expects 3D printing to be huge in factories and in manufacturing.

"Will retail 3D printing ever become a sustainable market?" Willard questioned. "That's a little more questionable. That's why I think Stratasys is a better 3D printing play than any of the others."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Image Credit: Public Domain