3D Systems Has Soared Along With GameStop. Analyst Says Enough.
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A print is removed from a 3-D Systems printer at Forge Labs in British Columbia, Canada, on Wednesday.
James MacDonald/BloombergThe last time 3D Systems stock went on a wild ride, it was 2014 and the tech world had declared it to be the year of 3-D printing. It didn’t last. Shares got crushed after investors realized that the company was better at hype than at selling its products, and the stock hit a 10-year bottom of $4.65 in September of last year.
This year, amid the speculative mania surrounding highflying stocks such as GameStop (ticker: GME), and AMC Entertainment Holdings (AMC), 3D Systems (DDD) is back on another rampage. Even after a loss on Friday, it has shot up 239% this year to close the regular session at $35.54.
But things are very different at 3D Systems this time.
Around the 10-year low, Craig-Hallum Capital Group analyst Greg Palm got interested in the stock. At a price of less than $5, he argued, the shares were meaningfully undervalued and were “disconnected from the fundamental improvements and strategy change.”
Palm wrote in a client note Friday that the company has turned itself around, completely transforming the business, by divesting non-core assets, improving the balance sheet, and becoming more efficient. He pointed to preannounced earnings that demonstrate a return to revenue growth for the first time in two years.
Still, Palm has had enough of recommending it.
On Thursday, Barron’s identified 3D Systems as a tech stock that was vulnerable to a short squeeze. A squeeze can send shares soaring, and may occur when investors who are shorting a name can no longer sustain the losses that come from a rising share price. As investors are forced to go into the market and buy shares, stocks can achieve spectacular advances in single trading sessions.
In his Friday note, Palm reached the conclusion that 3D Systems is indeed undergoing a short squeeze. “Given our view that this recent move has been driven by a short squeeze and retail momentum vs. underlying fundamentals, we feel it’s prudent to step to the sidelines and wait for a pullback before getting more bullish on shares again.”
He downgraded the stock to a Hold, but maintained his target of $27 for the price. He said that the price has moved beyond even his team’s most bullish expectations, and created more returns for shareholders than he thought would happen. The company didn’t immediately respond to a request for comment.
His view lines up with Wall Street’s , which doesn’t have a single Buy rating on the stock. In fact, the mean target price is $20.14, which implies a downside of nearly 43% from Friday’s close. Of the analysts that cover the name, 67% rate it a Hold, and 33% give it a Sell.
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