Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DDD over the next 72 hours.
3D printing stocks such as 3D Systems(DDD), ExOne(XONE), and Stratasys(SSYS) have all been under pressure this year. After the announcement of Hewlett-Packard’s plan of entering the 3D printing market, investors are concerned that Hewlett-Packard’s entry to the 3D printing market will shake up the current market leaders. However, I believe that 3D Systems will remain relevant in the 3D printing market if they manage their position well.
Founded in 1986 in Valencia, California, 3D Systems specializes in manufacturing 3D printers and printing materials. The company is the largest 3D printing company with revenues of 513 million in the year ended 2013. With 3 different product classes of 3D printers, personal, professional, and productions, 3D Systems currently enjoy most of the market share in addictive manufacturing. They also have different varieties of each class; printers that produce parts that are durable, or printers that produce parts that are more detailed and smooth. 3D Systems currently holds a commanding position in the addictive manufacturing, number one in the entire market.
Here are some key financial ratios:
Note that the most important ratios to a valuation of a stock is the company’s:
- Price-to-Earnings Ratio (P/E ratio)
- Price-to-Book Ratio (P/B ratio)
- Debt-Equity Ratio
- Net Margin
- Price-Earnings to growth ratio (PEG ratio)
- Revenue Growth rate
To over-simply this analysis, I will not go into the details: 3D Systems is doing better than their competitors.
The price history of DDD is a classic example of a head and shoulders pattern. However, I believe that it has bottomed out since it held the low of 27.46 and continued to make higher lows since reaching the low. In theory, the price will continue to rebound until it hits the resistance at around $41.
The 200 Smoothed Moving Average (SMMA) has always been a key resistance for the stock. In multiple instances, the price briefly touched the 200 SMMA before crashing even more. On Friday, December 26, 2014, the price once again tested the 200 SMMA on high volume. The price movement must be watched carefully because breaking the 200 SMMA coupled with high volume will confirm a bullish reversal from the stock’s poor performance this year.
Long position strategy for 3D Systems (NYSE: DDD)
3D System is currently priced at $32.96 per share, and I believe it has the potential to reach $41 before reaching any significant resistances. That makes a profit of $8.06 per share, or approx. 24.39% gain.
To lower risk, it is important to set a goal and create a stop loss.
If the price movement on Monday confirms a breakout of the 200 SMMA, I would definitely initiate a long position, and then I will set a stop loss at the support of 32.46 (confluence 16).
Note: This analysis has been oversimplified, there was much more research and analysis on the company than shown. Do your own due diligence!
The stock market is a no-called-strike game. You don’t have to swing at everything–you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’