Why stocks of 3D Systems, Stratasys, and Desktop Metal all rose 10% (or more) today

What happened

For the third day in a row, 3D printing stocks are skyrocketing today – and in unison – with Office metal (NYSE: DM) equities up 10.4%, Stratasys (NASDAQ: SSYS) up 10.6%, and the eponymous industry name, 3d systems (NYSE: DDD) leading the pack with a gain of 10.9%.

You can probably thank JP Morgan for at least some of these gains.

Image source: Getty Images.

So what

Yesterday, investment bank JP Morgan withdrew its sell rating on Stratasys stock, raising the stocks to neutral with a price target of $ 29 that the stock still has not met. Although the analyst admits that Stratasys – in fact, that all of 3D printing industrial sector according to StreetInsider.com – still trading at “high multiples” the analyst just cannot resist the temptation to upgrade given the recent pullback in 3D stocks from all sides.

“The reward for risk is more balanced,” says JP Morgan, and Stratasys stock “is trading closer to fair value” today than in the past. At the very least, the analyst now expects the stock “to perform in line with our average coverage over the next 6 to 12 months.”

Now what

And that seems to be enough for investors in Stratasys stocks today, as well as 3D and Desktop Metals. And can you blame them?

From top to bottom, Stratasys shares have slumped 60% in the past month. 3D has fallen 59%, and even Desktop Metals, a relatively recent IPO, fell by 54%. Suffice it to say, it can be difficult for any investor – even a veteran like JP Morgan – to resist a half-price sale.

And yet, that’s exactly what I’m going to invite you to do today. Yes, these three stocks may be significantly cheaper today than they were a month ago, but none of these companies are profitable yet. 3D and Desktop Metals even burn money and report negative numbers according to generally accepted accounting principles (GAAP).

If you absolutely can’t resist the allure of bottom fishing, I agree with JP Morgan that Stratasys is probably the best of the bunch, now that their free cash flow has turned positive again. Still, with less than a million dollars in positive cash profits generated over the past year and still deeply negative profits, it remains a risky bet. If you must buy it, I suggest buying small for now and waiting for proof that the company has definitely taken the plunge before betting on Stratasys.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Lucille Thompson

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