On Aug 19, Zacks Investment Research upgraded Stratasys Ltd. (SSYS - Analyst Report) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The 3D printing solutions provider was primarily upgraded on the back of positive estimate revisions for fiscal 2014. The company’s strong second-quarter results and favorable fiscal 2014 guidance also contributed.
Stratasys reported better-than-expected second-quarter 2014 results on Aug 10. Reported earnings and revenues compared favorably on a year-over-year basis. The company witnessed improvement in the revenues of both Products and Services segments due to robust demand for its higher-margin products and services.
Higher demand for its MakerBot products and increased sales of higher-end Fortus and Connex systems boosted the top line. The company also reported strong demand for entry-level Mojo and uPrint 3D printers.
Buoyed by the higher adoption of its 3D technology and printers, Stratasys raised its 2014 guidance as well. The company also updated its long-term operational targets, which includes a 25% organic revenue growth (previous forecast 20% growth).
Moreover, Stratasys has witnessed positive estimate revisions for fiscal 2014 over the last 30 days. During the period, 4 out of the total 6 estimates were revised up and as a result the earnings estimate increased from $1.75 to $1.87 per share.
Notably, Stratasys’ shares gained about 25.8% over the last 3 months. Other 3D printing solution providers such as Voxeljet (VJET - Snapshot Report) added 16.9%, ExOne (XONE - Snapshot Report) gained 6.9% while 3D Systems (DDD - Analyst Report) declined approximately 1.1% during the same time frame.
We believe 3D printing market presents a favorable long-term investment opportunity as a large number of engineers, designers, architects and entrepreneurs are resorting to 3D solutions for their primary designing and product modeling.
Moreover, favorable forecasts by market research firms such as Gartner, IDC and Canalys have renewed investors’ interest in the emerging 3D technology stocks. Per Gartner, worldwide shipments of 3D printers will increase 75% to 98,065 units in 2014 and almost double in 2015. IDC predicted that the 3D printer market will witness a compound annual growth rate of 29% from 2012-2017. Canalys expects the global 3D printing market to soar from $2.5 billion in 2013 to $16.2 billion in 2018.
We, therefore, believe that the adoption rate and cost control measures will be important factors determining the fortune of the players in this segment.