Why Proto Labs 3D Printing Stock Jumped 38% in January

What happened

Fast Turning Contractor Actions Proto labs ( PRLB 1.67% ) jumped 38.1% in January, according to data from S&P Global Market Intelligence.

For context, the S&P 500 index fell 1% last month.

Image source: Getty Images.

So what

We can attribute the strong performance of Proto Labs stock last month to two main catalysts.

First, investors liked the company’s acquisition news. Shares jumped 6.6% after Proto Labs announced on Jan. 19 that it was buying 3D Hubs, a leading Netherlands-based online manufacturing platform that provides customers with on-demand access to a global network of manufacturing partners. Following the January 25 announcement of the closing of the $280 million deal, shares gained nearly 8%.

Proto Labs says the acquisition means it has “the world’s most comprehensive digital manufacturing offering for custom parts.” It expects the acquisition to be accretive to its rate of revenue growth and slightly dilutive to its adjusted earnings per share in 2021.

In 2020, 3D Hubs generated approximately $25 million in revenue. For context, Proto Labs had revenue of $329.2 million in the first nine months of last year and had revenue of around $101 million in the fourth quarter, making its annual tally likely to be in the order of $430 million.

So 3D Hubs is currently quite small compared to Proto Labs, but it has grown very rapidly. It has a compound annual growth rate of over 200% since 2017.

The second catalyst that pushed Proto Labs shares higher last month was industry-related rather than company-related. Investors pushed the stock up 13% on Jan. 7 following good news from 3D systems ( DDD 1.28% )whose shares soared 104% that day.

PRLB Chart

Data by YCharts.

In addition to other news outside of Proto Labs, 3D Systems announced preliminary results for the fourth quarter of 2020 that were significantly better than Wall Street expected.

As Proto Labs and 3D Systems compete in on-demand 3D printing services, investors believe that 3D Systems achieving stronger-than-expected Q4 results makes it more likely that Proto Labs will follow suit. Both companies serve many industrial companies, as well as healthcare companies.

Proto Labs shares aren’t just a one-month wonder, as shares have more than doubled in the past year.

PRLB Chart

Data by YCharts.

Now what

Investors shouldn’t have to wait long for important news. Proto Labs is expected to release its fourth quarter and full year 2020 results on Friday, February 12, before market open.

For the fourth quarter, the company forecast revenue of between $96 million and $106 million, compared to $107.5 million in the third quarter.

During last quarter’s earnings call, CFO John Way explained the reasons for the expected sequential decline: “The third quarter included $3 million in COVID-related orders, and we expect less COVID-related revenue. in the fourth quarter. Also, our fourth quarter revenue tends to be lower than the third quarter, due to our normal seasonality pattern.”

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