3D printing stocks have rallied strongly over the last few weeks. Better-than-expected earnings and guidance from many 3D printing companies have contributed to the significant rise of the entire sector. While I understand why the likes of 3D Systems (DDD, Financial) and Stratasys (SSYS, Financial) rallied, even though I don’t expect the rallies to last, I find the rise of ExOne (XONE, Financial) groundless.
The stock has rallied on the news of other 3D printing companies reporting strong sales. ExOne will be an exception to that trend and investors can benefit from the rally by shorting the stock.
ExOne has never beaten estimates
While the entire 3D printing sector is seeing higher demand, I don’t expect ExOne to follow the trend as it has historically been the most badly run company. Since going public, ExOne has never managed to deliver on the analysts’ expectations and has been losing money every quarter.
Despite these negative factors, ExOne has rallied and is now trading almost 100% higher than its all-time lows. While ExOne has risen in sync with 3D Systems and Stratasys, I don’t expect it to raise its guidance like the other companies, which is why I find the rally unreasonable.
ExOne was supposed to report earnings on March 15 but recently pushed the date back by a week. What’s bad, however, is the company has already reiterated its guidance of $40 million in annual sales, meaning that it is not witnessing higher sales like its peers.
Assuming that ExOne hits its guidance of $40 million in annual sales, the stock will still have a P/S ratio of almost 4.5, which is expensive no matter how you look at it. For a stock that has a terrible track record, ExOne is trading at an undeserved premium, and investors should capitalize on the recent rally by shorting the stock.
Conclusion
ExOne’s rally will be short lived. Going by the company’s recent guidance reiteration, it is clear that it did not witness stronger sales unlike its peers. For this reason I find ExOne’s rally baseless, and I expect the stock to head lower after it releases the earnings report. However, opportunistic short sellers can benefit from this rally by shorting ExOne.
Disclosure: The author doesn’t have any position in the stocks mentioned in the article.
