MorningWord 11/21/13: Most investors have never heard of the German 3-D printing company Voxeljet (VJET) whose $100 million U.S. ipo last month quickly turned into a fabulous bubble, with Monday’s close representing 425% gains since its debut. In just 2 days since those highs, the stock is down 44%, down 32% yesterday alone. WOW.
People, this is not normal behavior, but while the price action clearly speaks to irrational exuberance, it comes at a time where once loved speculative momentum leaders like TSLA, SCTY, LNKD, MELI & Z can’t get out of there own way, so maybe its merely a matter of the the day traders flipping in and out of what they deem to be the flavor of the month.
The 3-D printing space has been on fire most of the year with the aptly named & symbol ‘ed 3D Systems (DDD) sporting the largest market cap just over $7 billion, despite sales that are barely expected to top $500 million this year. Short interest has been climbing with the stock’s ascent, recently hitting 27% of the float, which has obviously added a little fuel to the fire.
Interestingly enough, DDD has had a fairly orderly climb until recently. The one year chart (below), shows a multi-month consolidation just below the previous highs, and then an outright explosion to the upside in a matter of weeks, This is likely one of the most beautiful breakouts you will ever see (while the 18% 3 day decline from Monday’s highs might be the start of one of the most fabulous technical collapses):
So in the short-term, the parabolic moves seem to be over, and the psychology might have finally turned. The real question in the long run for these stocks is whether the investment euphoria now will be quickly justified by the industry’s growth, or whether the excitement today will only be fulfilled in 5-10 years (see Internet in 2000, or solar today). The answer to that question will determine whether these stocks are due for much steeper falls, or just some time of consolidation as the earnings catch up to the valuation.