Credit Suisse Shows Not All 3D Printing Stocks Made Equally

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If you just read headlines out there and did not look for context, chances are high that you might have gotten duped into thinking that all 3D printing companies were the beneficiaries of bullish research notes. That is only partially true from Credit Suisse’s 3D printing coverage initiations.

Credit Suisse initiated coverage on three different 3D printing stocks on Tuesday. The firm’s preferred pick is 3D Systems Corp. (NYSE: DDD), while the least preferred of the 3D printing stocks is The ExOne Co. (NASDAQ: XONE).

The report from analyst Julian Mitchell said, “Our proprietary 3D penetration analysis suggests consensus sales growth forecasts could prove conservative. Most corporate guidance defaults to the assumptions of industry consultants who estimate that the 3D printing market will grow at approximately 20% annually. We challenge this assumption and attempt to quantify the addressable market by investigating the opportunities within key verticals such as aerospace, automotive, healthcare, and consumer, which alone could support 20% to 30% growth.”

3D Systems Corp. (NYSE: DDD) was started with an Outperform rating and $62.00 price target. That implied upside of about 28% to the $50.06 close the prior day, but shares were up over 5% in mid-afternoon trading on the news. Be advised that the consensus price target is down at $55 and we recently saw that a short selling ETF run like a short selling hedge fund identified this as having the worst accounting metrics of its shortable universe just a week ago.

Stratasys Ltd. (NASDAQ: SSYS) was started as Neutral with a $103 price target. Its closing price was $93.45 on the prior day and shares were up almost 3.5% at $96.65 in mid-afternoon trading on Monday. Julian Mitchell said, “Stratasys has undertaken some major portfolio moves in the past 12 months, including the merger with Objet Systems (which added the PolyJet printing method as well as a strong Far East sales presence) and the recently closed acquisition of Makerbot (providing a strong position in consumer markets).

ExOne Co. (NASDAQ: XONE) was given the “rotten apple” ranking of the lot. This 3D printing outfit was started as Underperform with a $48 target price. The prior close had been $50.80 but the new price was down 2.2% at $49.79 in mid-afternoon trading on Monday.

On ExOne, Julian Mitchell said, “We see three key downside risks to consensus sales growth assumptions: (1) uptake of the core technology is liable to be constrained by lack of CAD penetration in Asia (where XONE has higher exposure than peers); (2) there is a need for significant post processing in metals (unlike competing technologies); (3) revenues are highly cyclical, given full exposure to industrial markets and minimal materials ‘tail’ following a system sale.”