3D Printing Stocks Are 'Untouchable' Until Margins Stabilize

The 3D printing industry is taking a beating after Stratasys, Ltd. SSYS paved the way for investor disappointment.

The company's guidance proved to be weaker than expected, indicating that 2015 could be a rough year for Stratasys. Shares fell more than 30 percent Tuesday and have yet to rebound more than a couple points.

Cody Willard, chairman of Scutify (a financial social network), said that he is neither bullish nor bearish on the space. He doesn't have any desire to invest in any of the related companies, however.

"It's a tremendous growth sector but the companies are suffering margin declines," Willard told Benzinga. "Until they get margins stabilized, it's untouchable."

Related Link: 3D Printing Industry Won't Be 'Tested' Until Hewlett-Packard, Others Arrive

'Huge, High-Growth' Disappointment

What happened to Stratasys, which was once the strongest player in 3D printing?

"It got hit hard," said Willard. "This was supposed to be a huge, high-growth company and it's got a multiple to match. The guidance is top-line less than expected and the margin decline hurts even worse."

That said, Willard said that Stratasys is the "best in class" among those within the industry.

"I don't like the management at 3D [Systems]," he said. "They're way too hopeful. ExOne has struggled ever since it went public."

3D Systems Corporation DDD was down more than 6 percent. It was previously down more than 9 percent. ExOne Co XONE lost more than 5 percent of its value.

"[ExOne] was a billion-dollar company not very long ago," Willard added.

Giving Up

Willard said that he would "give up" on 3D printing stocks for now.

"The margin issue has to improve," he said. "I would wait until you see at least a quarter or two of expanding margins, not declining margins. Then you might have a long-term, revolutionary investment."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.