The following is from an email Whitney Tilson sent to ValueWalk....MORE
Ya can’t make this stuff up! From a friend who met with the CEO of 3D Systems Corporation (NYSE:DDD) (not some penny stock, but an $8 BILLION company):
Avi told me during a 1×1 that “his company is 50% technology, 20% innovation and 30% awesomeness.”
What is the appropriate discount rate to apply to “awesomeness”?
And from Barron's Tech Trader Daily Dec. 4:
3D Systems Reminds Tilson of Segway; Not Short Stratasys, the Better Business, He Argues
A short while ago I spoke with Whitney Tilson of hedge fund Kase Capital, who yesterday issued some damning remarks about 3-D printing stocks, and 3D Systems (DDD) in particular. This morning, Tilson presented his views on the matter, along with some other short-sale candidates, at a forum held by the Harvard Business School Club of New York. (Note that Tilson changed the name of his firm from T2 Partners after he split with his business partner.)...MORE
Tilson tells me he has about 2% of his $70 million in assets under management sold short in shares of 3-D printing stocks, or roughly $1.5 million, spread pretty much evenly across shares of 3D Systems, The ExOne Company (XONE), and VoxelJet (VJET). He is not shorting Stratasys (SSYS), as he believes it is “more of a real company,” by which he means that Stratasys has not engaged in as much M&A as 3-D systems and has focused more on managing its business by steady product development.
Tilson notes it is harder to short shares of XONE and VJET, as the shares are harder to borrow, and that given their smaller market caps — $812 million and $675 million, respectively, versus $8 billion for 3D Systems — the trade can turn against a short seller more easily. “A half-billion stock can turn into a $2.5 billion stock overnight.” Despite not making as much noise about ExOne and Voxeljet, Tilson argues the two are the “2nd- or 3rd-place companies, the kind of me-too outfits that tend to jump aboard” a hot sector. He thinks they are actually not as high quality as 3D Systems.
Tilson’s view is that the market, and the products, are certainly real, but that the stock multiple of 17 times trailing revenue for 3D Systems stock is unreasonable given what will be a small, slowly growing market for years to come. He compares the enthusiasm for the names to the enthusiasm for the Segway scooter, which was a good piece of technology, but has failed the most exuberant hopes for its success:
3-D printing has been around for decades and will continue to exist and grow. But I think there is zero chance there will be enough growth to justify DDD at 17 times revenue. It should trade at perhaps 1 to 2 times revenue. Just look at what the CEO of [contract manufacturer] Foxconn said. He was asked if he would be making 3-D printers for consumers anytime soon, and he said, No way, it’s a joke....
And TTD Dec. 3:
3D Systems: One of the Great Shorts in Market of Massive Stupidity, Says Tilson
He's right,
If you look at each company's recent acquisitions, Makerbot for DDD and Objet for SSYS, there's no comparison on who has the smarter long term strategy.
Now if only Stratasys would buy Arcam...
