The world of 3D printing is supposed to be the next big thing. It has even been referred to by some as the next bubble. Now we have news that Stratasys Ltd. (NASDAQ: SSYS) is being hurt by its 2014 guidance. The news was also dragging down shares of rival 3D Systems Corp. (NYSE: DDD) in early trading on Tuesday, and the news basically coincides with a poorly timed analyst research note.
Stratasys said that full 2014 earnings would come in at $2.15 to $2.25 per share, shy of the $2.35 consensus estimate. Revenue was put at $660 million to $680 million, slightly above the consensus estimate of almost $656 million. This seems to be a scenario in which the operating expenses are rising handily, due to investments in sales and marketing programs, along with higher research and development expenses.
The company’s operating margins are projected to remain relatively consistent in 2014, and margin expansion is being offset from the lower margins in MakerBot. Stratasys said that MakerBot’s performance is exceeding expectations and is still on track to be accretive to earnings by the end of the year.
Another concern about the guidance is that 2014 is being represented disproportionately from the second half of the year, meaning that it is back-end loaded. What happens if more issues arise between now and the second half of 2014?
That 3D printing analyst upgrade was very unlucky in its timing. Valuations are extremely high in this sector, and Wall Street is not going to go easy on lackluster or in-line numbers from such a high growth sector yet.
RBC Capital Markets started 3D Systems Corp. (NYSE: DDD) as Outperform with a $118 price target, and started Stratasys Ltd. (NASDAQ: SSYS) as Outperform with a $175 price target. The driving force for the positive calls was the belief of 24% compounded annual revenue increases for the industry through 2021, with consumer printing revenue expected to double through 2017.
24/7 Wall St. also just pointed out how the short sellers have had to flee these shares based on too much share appreciation. The good news Tuesday morning is that things could have been taken far worse than they were.
Stratasys shares were down 4.5% at $124.13 in above-average trading volume after the open. 3D Systems was down only a few cents at $91.50 right after the open on Tuesday. Also, keep in mind that these stocks are close to all-time highs and trade for between 75 and 100 times trailing earnings.
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