The 3D printing bubble has burst, but many companies in the sector are still a little ahead of their fundamentals. I recently wrote an article highlighting why investors should stay away from 3D Systems (DDD, Financial), citing the company’s slowing growth and goodwill write-offs.
However, 3D Systems is not overvalued enough to short. One 3D printing stock that I think investors can still short is ExOne (XONE, Financial). Despite being unprofitable, ExOne is trading at almost four times trailing sales and has appreciated considerably since testing the 52-week lows of $5.81. The stock has shot up 40% since touching those lows for no reason, and this presents a great opportunity for investors to short it.
ExOne has been consistently disappointing investors, which is why the recent rally is surprising. In fact, ExOne has managed to miss the analysts’ estimates for each and every quarter since going public. This speaks volumes about the company’s management and its execution, but this is an opportunity for investors in the stock. Investors can put this rally to good use by shorting ExOne.
ExOne’s latest quarterly report was another disappointing one, and this trend will continue next year as well. For Q3, ExOne recorded revenue of only $8.9 million, widely missing the analysts’ estimates by $7.78 million. On the earnings front, the company posted EPS of -70 cents, falling short of the analysts’ estimates by 59 cents.
The company also expects full-year revenue of $40 million, down from $43.9 million a year and well below prior guidance of $58 million to $60 million. In response to the terrible report, ExOne’s shares fell 20% the following day, but the shares have risen considerably since then for no reason.
Given that there’s no fueling factor behind ExOne’s unprecedented, the stock will test its 52-week lows soon, making it a good short candidate.
Conclusion
ExOne is the only stock in the 3D printing sector that investors should short. Despite being unprofitable and missing the estimates every time since its IPO, ExOne is trading at a premium and the stock will fall in the coming months. Another disappointing earnings report will push the stock downward; given the company’s past, don’t bet against it. Investors shorting ExOne can still witness about 30% profit.
