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Cramer’s sell stock: Bullish catalysts ebbing away

(Click for video linked to searchable transcripts of this Mad Money segment)

Jim Cramer always says, when you buy a stock, you have to actively visit your reasons for owning it. And when the catalysts begin to wane, you have to sell.

If you're currently holding niche 3D printing stocks, Cramer thinks it's time to plan your exit; he believes that sector's bullish catalysts are ebbing away.

"I think you should begin to calmly sell them into strength," Cramer said, "especially 3D Systems."

Looking at the industry broadly, Cramer sees gathering headwinds.

Chrisho | E+ | Getty Images

"A big reason these stocks rallied so hard in the first place is that 3D printing is really cool," Cramer said. That is, investors were swept up in the technology. "They thought 3D printers would become a common household item."

But that didn't happen. And because the kinds of 3D printers needed to make somewhat complicated items can cost more than $100,000, Cramer says it probably won't happen. "Less expensive 3D printers, those that cost around $800, are much more limited."

Also, Cramer said, competition is becoming fierce.

"In the past, 3D printing companies have only been competing with each other: 3D Systems versus Stratasys versus Objet versus Voxeljet. Lately, though, we've started hearing from old-line tech players with deep pockets, like Hewlett-Packard, IBM, Mitsubishi and Epson, all of whom want to try to grab a piece of the 3D printing market."

Cramer says that's very, very bad for the smaller players. "They can't raise prices, or they'll lose market share." Therefore, Cramer expects margins will shrink.

Now, looking at 3D Systems in isolation, Cramer sees other negative catalysts that, he says, are specific to this stock.

First, Cramer doesn't think the stock can sustain its market cap, given the industry outlook.

"3D Systems is now worth $5.2 billion. Four years from now, in 2018, the entire global 3D printing industry is expected to have roughly $6.5 billion in annual sales. The market cap suggests the company should be worth nearly as much as the whole 3D printing business in 2018. That doesn't make sense."

What's more, Cramer worries the company's growth strategy is in jeopardy.

"3D Systems has been growing faster than the broader 3D printing industry because they've made a slew of acquisitions, nearly 50 since the middle of 2009, but that strategy is simply not viable anymore. The company has pretty much run out of viable takeover targets."

Cramer also cited rising inventories, disappointing guidance and the volume of insider selling as other negative catalysts.

And finally, "It's still darned expensive, trading at 61 times this year's earnings estimates and 7.4 times this year's sales. Even with a 23% growth rate, that valuation is far from being cheap."

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All told, Cramer believes reasons to own 3D printing stocks broadly and 3D Systems specifically have grown few and far between. Instead, he thinks investors would do better putting money to work elsewhere in the market.

Therefore Cramer thinks it's time to plan an exit.

"On days when 3D Systems rallies, sell into strength," he said. "It's an opportunity to get out at a relatively decent price."

Call Cramer: 1-800-743-CNBC

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