3-D printer maker 3D Systems Corporation (NYSE:DDD) will report second-quarter earnings after the close this Tuesday, Aug. 7. The shares have been on fire in 2018 -- and are now testing a key level on the charts -- yet most of Wall Street remains skeptical of DDD.
3D Systems shares are up 2.3% to trade at $13.15 today. After touching an annual high of $15.94 on July 13, DDD stock pulled back to test the support of the $12 region, which represents a 50% Fibonacci retracement of the equity's rally from its November low of $7.92 to the aforementioned peak. This area is also home to the security's uptrending 160-day moving average. Now, DDD is attempting to establish a floor in the $13 neighborhood -- a 38.2% Fibonacci retracement of the same rally, and representing a 50% gain year-to-date.
On the earnings front, DDD stock last week got a halo lift from sector peer Stratasys (SSYS), which reported stronger-than-expected quarterly figures. Looking back eight quarters, 3D Systems shares have averaged a one-day post-earnings swing of 11.2%, regardless of direction. This time around, the options market is pricing in a bigger 16.6% swing for DDD stock.
While bought calls have outnumbered puts on an absolute basis in the past two weeks, the stock's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 0.43 is in the 80th percentile of its annual range. This suggests traders have ramped up their DDD put buying relative to call buying ahead of earnings.
Plus, although the stock has rallied more than 30% in the past three months, just one of eight analysts maintains a "buy" rating on DDD. Likewise, the average 12-month price target of $10 represents a discount of 24% to the equity's current perch.
And while short interest has dropped in recent reporting periods, these bearish bets still account for 29% of the security's total available float. At 3D Systems stock's average pace of trading, it would take more than four weeks to repurchase these pessimistic positions.
In conclusion, should the company follow the lead of Stratasys and report an earnings beat tomorrow night, an exodus of bears could bode well for DDD shares. More specifically, the stock could benefit from a reversal of sentiment in the options pits, a flood of upbeat analyst attention, or a healthy short squeeze.