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Why Stratasys Stock Just Exploded Higher

What happened

Three days ago, shares of 3D printing company Desktop Metal (NYSE: DM) soared 24% on a news of a dramatic expansion in production capacity to keep up with demand for 3D printers. As you'll recall, I pointed out at the time that investors were betting that Desktop Metals rivals such as Stratasys (NASDAQ: SSYS) would follow in the track Desktop Metal was blazing, and exceed expectations on their upcoming earnings reports.

Turns out, that was a smart bet to make, because Stratasys just crushed on its third-quarter earnings report, sending its shares flying 16.7% higher through 11:40 a.m. EDT.

Image source: Getty Images.

So what

Instead of the $0.06-PER-SHARE loss Wall Street had predicted on sales of $150.1 million, Stratasys reported a surprise $0.01-PER-SHARE profit -- and sales of $159 million. Those sales were up 24% year over year, and with the gross profit margin surging 4 full percentage points to 42.9%, Stratasys was able to eke out a tiny profit where Wall Street expected a loss.

Hurray? Not so fast. Stratasys' profit was actually only of the pro forma variety (albeit, the predicted loss would have also been pro forma). When calculated according to generally accepted accounting principles (GAAP), it turns out that Stratasys was still in the red with a $0.28-PER-SHARE loss for the fiscal third quarter. (Although again, to be fare, that was a whole lot better than last year's Q3 GAAP loss of $7.35 per share.)

Now what

So long story short, despite beating earnings for the quarter, Stratasys remains an unprofitable operation, just as it's been for the majority of the past decade. The good news is that CEO Yoav Zeif says his company is "at an inflection point for additive manufacturing," and the rise in revenue supports that view.

The bad news is that next quarter, Stratasys is guiding investors to expect only 16% revenue growth -- solid, but not as fast as we saw in Q3. And until the company can produce some positive profits, I have to conclude that Stratasys remains a speculative investment, no matter how sharply its shares spiked today.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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