As the stock markets closed today, troubles seemed ahead for 3D Systems.
The company, one of the largest dedicated 3D printing organizations on the planet, posted their third quarter financials today and it did not look pretty, at least as far as investment analysts and investors perceive.
Evidently the company’s shares are down almost 19% in aftermarkets (as the normal stock markets are now closed for the day), a very substantial drop. The reason for this is that the company missed their estimates of earnings for the quarter.
Those estimates, provided earlier, are the basis for investors to set the price they pay for the stock. It’s assumed the company will almost always meet them. In the event they did not, like today at 3D Systems, the investors react by selling shares, thus dropping the price.
The company also withdrew its guidance. For those not familiar, the “guidance” is an official statement from the company that provides an estimate or indication of the expected future earnings. Now that they’ve missed the previous estimates, they are no longer providing an estimate for the next period. This means the stock price will waver at the whims of the market a bit more than usual.
Regarding the absence of future guidance, they explain:
Management is focused on building the company for long term growth, profitability and success. This includes significant transformational work in solving for legacy issues while at the same time addressing current and go forward execution. Predictability has been difficult in this environment, and therefore, management believes it is prudent to withdraw guidance at this time.
In other words, they’re changing things up so significantly inside their walls that they don’t wish to provide an estimate.
And what exactly are those things changing? CEO Vyomesh Joshi explains a bit more:
We have increased investments and resources to resolve legacy quality and reliability issues faster and have implemented organizational changes to continue to improve execution. We have made significant progress in many areas over the first nine months of this year and are taking additional actions necessary to position the company for long term success. At the same time, we continue to innovate for the future, and plan to bring to market a series of new and exciting products over the coming months.
One can look at this positively or negatively.
A negative view might propose that the company is unable to meet their estimates so something must be wrong and the stock price had best drop.
A positive view might say that this is a company facing change as we described in detail in our epic history of 3D printing post last week, and that do to so they need major surgery internally. This surgery is so extensive that it affects their earnings for a time. In other words, they are doing a major reno and the house won’t look pretty for a while. It may even be a good time to buy stock as it is low.
Which is true? Probably a bit of both, but mostly the latter. They are still a very large company with plenty of cash on hand, so they can withstand this scenario for a long time. A better question would be whether they can invent their way forward with new innovative products as Joshi explains. We will see when they are released.
And we’ll see how their stock price fares tomorrow.
Via 3D Systems