3D printing is an industry that has fallen from grace. In very recent history it was all the rage and 3D printing companies were at all-time highs. Stratasys Ltd. (NASDAQ: SSYS) was among them. However after their drastic fall over the past few years, one key analyst thinks that Stratasys has hit an earnings bottom, but investors still should remain cautious and vigilant.
Oppenheimer noted that recent visits with Stratasys management highlighted “a bit more color on cost actions (a mixed bag) and optimism” on hopes that MakerBot’s quality issues had past.
There remains near-term pressure, even amid positive long-term signals. The firm did like a commitment to better earnings quality and credibility-rebuilding execution, though this does spur it to shave EPS in anticipation of a conservative tone in the fourth-quarter discussion. Still, Oppenheimer doesn’t think the stock needs rollicking demand to work in 2016.
Ultimately, Oppenheimer thinks Stratasys needs 2015 to prove to be the earnings bottom, with better execution and visibility in 2016. The firm continues to believe this scenario plays out, supporting its Outperform rating with a $38 price target.
Oppenheimer detailed in its report:
Current demand trends remain broadly soft. At the same time, customer feedback (including at FormNext, which it viewed as successful) points to sustained long-term interest. Still, the factors weighing on sales in the near term likely have legs, and the outlook going into 2016 should be subdued.
Long term, the firm believes that the company has more structural changes planned. Oppenheimer would like to have gotten more of a sense of larger, faster, more cathartic actions. Considering this, management is methodically attacking costs, clearly viewing the expense lines as the key to achieving its goals in the near term.
Overall, the message appears to be very conservative going forward, but this is a good starting point in the long term.
Shares of Stratasys were trading down about 3% at $24.80 on Friday, with a consensus analyst price target of $28.82 and a 52-week trading range of $22.15 to $87.89.
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