From Barron's Tech Trader Daily:
Shares of 3-D printer maker Stratasys (SSYS) are down $27.17, or almost 34%, at $52.91, as the Street parses the company’s announcement yesterday afternoon that it’s results last quarter will miss expectations, as will results this year, as a consequence of delays in getting product out the door by its consumer division, MakerBot, which Stratasys bought last year.
Competitors are feeling the heat as well this morning: 3D Systems (DDD) stock is down $2.42, or 8%, at $27.83; Voxeljet (VJET) is off 56 cents, or almost 7%, at $7.86; and ExOne (XONE) is down 50 cents, or 3.5%, at $13.97.
The company held a conference call this morning with analysts, which you can listen to on replay.
The stock has gotten two downgrades today, with Piper Jaffray’s Troy Jensen cutting the stock to Neutral from Overweight, while Brean Capital’s Ananda Baruah cut his rating to Hold from Buy.
Piper’s Jensen writes “While we were anticipating an EPS guide down due to accelerated spending, the magnitude caught us off guard in addition to the unforeseen issues that evolved for the MakerBot segment.”
“We believe investor sentiment for this group and Stratasys specifically will remain an issue for the next several quarters,” he writes, “and believe Stratasys shares will remain depressed and out of favor until better execution and upward revisions are more sustainable.”
Jensen is grim on the entire industry till it can prove itself: ” we now feel like the stocks will be stuck in limited trading ranges or have more downside risk given the disappointments we have seen on the execution side.”
Brean’s Baruah writes the new lower operating margin for this year takes apart his positive thesis on the company:We haven't had anything on the stocks since April of last year, it may be time to start paying attention again.
We’ve been vocal since the Sep Q print that if SSYS could maintain OMs of ~17% in ’15 (vs. then ~17% for ’14) and grow organic revenue at least 25%, after speaking with numerous holders we believed the stock could work very nicely in ’15. We conversely suggested that if the OM’s were materially lower in ’15 that it would be very challenging for the stock to work. Given SSYS’s ’15 OM guidance of 13% (vs. 15% in ’14 and our prior estimate of 17% before last evening’s negative Dec Q preannouncement), we’re moving to a Hold rating while the stock digests the new business model.Writing before the call, several bulls defended the company, even though they slashed price targets and estimates.
Jason North of Jefferies & Co., who just last week pounded the table for the stock, citing positive reseller comments, today writes that he’d thought reseller channel growth would have offset the shortfall in Makerbot:
The fifth- gen MakerBot had issues with its extruder that led to many angry customers. Also, SSYS’ press release implies they have had problems with their ramping distribution strategy. We had thought the expanded channel would offset the reliability issues in Q4 but that the repercussions of the poor fifth-gen reliability could weigh on 2015 growth prospects; however, Q4 and 2015 were both worse than we expected with SSYS guiding 2015 MakerBot revenues to grow slower than the corporate average.But North sticks to his channel checks, insisting the disappointing outlook for this year may merely be “conservative”:
We had hoped that lower OM would at least be partially offset by better revenue growth, but SSYS 2015 guidance of +25%-28% Y/Y is below consensus expectations of +32% and is particularly disappointing considering the lower 2014 base. MakerBot appears to be the main culprit, but assuming MakerBot grows 15% Y/Y implies SSYS’ non-MakerBot product revenues would only grow 20% compared to 32% in 2014 and 28% in Q4’14. Our recent reseller survey indicates that SSYS non-MakerBot resellers increased sales headcount by 57% in 2014, plan for 26% headcount growth in 2015, and are targeting 2015 rev growth of 43%. SSYS management could provide further details as to why the non-MakerBot business will decelerate so quickly, but our initial take views the revenue guidance as conservative.Andrea James with Dougherty & Co. reiterates a Buy rating but cuts her price target to $90 from $139, writing that the cut in operating margin outlook to 15% from a target range of 18% to 23% is “disappointing” given that the “big question” for the company is whether it can achieve operating leverage....MORE
No hurries, no worries though. When they fall out of favor they don't get fixed overnight.
