Why Shares of Stratasys, Ltd. Plunged 12% on Monday

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What happened

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Shares of 3D-printing company Stratasys, Ltd. (NASDAQ: SSYS) fell as much as 11.8% on Monday after being downgraded by an analyst. At 12:45 p.m. EDT shares were still down 10.6% on the day.

So what

Analyst Matthew Cabral at Goldman Sachs downgraded the stock from a neutral to a sell rating and put a $20 price target on the stock. He thinks headwinds are starting to hit the business as competitors ramp up their offerings and companies begin to compete on price. Cabral was also concerned about the lack of metal printing in Stratasys' portfolio.

Stratasys has been hoping the 3D printing market would stabilize and long-term commercial customers would start finding value in the company's offerings. That may be happening, but if companies are going to be competing on price it could be hard to build a profitable business in 3D printing.

Now what

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Analyst downgrades themselves aren't a reason to panic, but a downgrade is an opportunity to look at critiques of the company and compare them to performance. In the first quarter, Stratasys saw sales decline 3% to $163.2 million and reported a loss of $13.9 million. Operating and net loss improved as operating costs fell, but it's worth keeping an eye on revenue and gross margin trends in the future to see if competitive pressure is leading to deterioration in the business. That would be something to be concerned about, but an analyst's downgrade isn't a reason for anxiety today.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Stratasys. The Motley Fool has a disclosure policy.