3D Systems Corporation (DDD)’s Earnings: The Good, the Bad, and the Crazy

For example, before the split analysts estimated that 2013 earnings per share of $1.58. If the split had never happened, management’s earnings guidance would come in at $1.50 to $1.73 per share, making the analyst estimate at the low end. Adjusting for the split, management guided $1.00 to $1.15, which looks like a huge miss. Of course, a stock split is all about appearances, and even if it looks like a miss at first, the earnings guidance was still a hit.

That might be why the stock has rapidly recovered over the week, as panicked sellers realized their mistake or created buying opportunities for others. It’s an excellent case study in why one should never buy or sell just because everybody else seems to be. It also raises a question: Why in the world would 3D Systems bother splitting their stock at all? Management said the split would “increase the market liquidity and broaden our investor base,” but it’s not as if 3D Systems is Berkshire Hathaway Inc. (NYSE:BRK.A), trading for $150,000 per share. Shares were trading around $60, and a 3:2 split puts them at $40. Who are these investors who want to buy shares of 3D Systems at $40, but were completely priced out of the market at $60?

Bottom line
As confusing and confused as the stock split may have been, nothing in Monday’s earnings changes the long-term thesis for owning 3-D printing stocks. This remains a highly speculative industry fueled more by expectations and emotions than earnings, and it will remain so for years. As I wrote last week, investors in 3-D printers shouldn’t just expect volatility; they should stop worrying and learn to love it. Whenever you see big price movements, just return to your original thesis and ask if anything has happened to change it. Don’t try to follow momentum.

The article 3D Systems’ Earnings: The Good, the Bad, and the Crazy originally appeared on Fool.com and is written by  Daniel Ferry

Fool contributor Daniel Ferry owns shares of 3D Systems and Stratasys and has the following options: short May 2013 $40 puts on 3D Systems, and short Mar 2013 $60 puts on Stratasys. For those unfamiliar with options, all of these strategies are optimistic, and the author profits if the stock price of either of these companies stays high. The Motley Fool recommends and owns shares of 3D Systems and Stratasys and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.