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Stratasys on an Acquisition Spree (REVISED)

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3D printing solutions provider, Stratasys Ltd. (SSYS - Free Report) is on an acquisition spree. Following the acquisition of two-privately held companies, Solid Concepts and Harvest Technologies, Stratasys has now signed an asset purchase agreement to acquire some assets of Interfacial Solutions, a production partner of Stratasys’ Fused Deposition Modeling (FDM) platform. The financial clauses of the deal were not disclosed. The transaction is expected to close in the second quarter of 2014.

Founded in 2003, Wisconsin-based Interfacial Solutions offers production and thermoplastics research & development (R&D) services to plastic industries. With the acquisition, Stratasys will strengthen its R&D capabilities and also enhance its overall production capacity. Moreover, since Interfacial Solutions is already a Stratasys partner with respect to thermoplastics development and manufacturing, the acquisition enables vertical integration in this respect. This should lead to better-quality products and reduce the time-to-market of future products.

We believe that the acquisition will also expand and enhance Stratasys’ additive manufacturing (AM) or 3D Printing Platform. Also, this acquisition will enable Stratasys to attract new clients and strengthen its overall market position.

It will also help Stratasys to cut out the middlemen, thereby reducing operating costs and boosting long-term growth prospects.

Stratasys has resorted to strategic acquisitions to diversify its offerings and expand its operating markets. The strong cash balance of $414.1 million in the fourth quarter of fiscal 2013 enabled the company to go for strategic acquisitions.

Nonetheless, in the near term, Stratasys’ investments are expected to impact its operating results. Moreover, Stratasys expects second-half fiscal 2014 non-GAAP net income to be governed by the rate of adoption of its new products. Considering the evolving nature of the 3D printing market and high cost of operations, we believe much of the company’s long-term profitability will depend on efficient cost management.

To conclude, Stratasys’ high-cost business model and competition from big and small players like 3D Systems Corp. (DDD - Free Report) and Voxeljet (VJET - Free Report) remain concerns.

Currently, Stratasys has a Zacks Rank #3 (Hold). Investors may consider a better-ranked stock like Juniper Networks, Inc. (JNPR - Free Report) , which sports a Zacks Rank #1 (Strong Buy).

(We have revised this article to correct a mistake. The previous version, published earlier, should not be relied upon.)

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