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Stratasys (SSYS) Buys Remaining Stake in Xaar 3D, Boosts Portfolio

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Stratasys (SSYS - Free Report) on Wednesday announced that it has acquired the outstanding stake in the Cambridge, UK-based inkjet printing technology group, Xaar 3D Ltd. However, the company didn’t disclose the financial terms of the transaction.

The acquisition of Xaar is pursuant to an agreement entered by the two companies in 2019. Per the agreement, Stratasys acquired a 45% stake in Xaar in 2019 and obtained an option to acquire the remaining stake at a later date. Stratasys cashed in its option to buy the outstanding shares just after six months of launching the H350 3D printer based on Xaar’s Selective Absorption Fusion (SAF) technology.

SAF is one category of powder-based fusion 3D printing process that employs an industrial-grade technology to achieve higher levels of production of end-use parts. It uses an infrared-absorbing fluid to help fuse the polymer powder. The technology was invented by Neil Hopkinson at Loughborough University, England, and is being further developed at Xaar 3D since 2017.

According to Stratasys, its SAF-based H series 3D printers are designed to deliver cost-competitive parts at the production-level throughput. The company believes this technology is capable of meeting the requirements of enterprises across automotive, commercial goods, consumer electronics, and consumer goods.

Therefore, the integration of Xaar will further strengthen Stratasys’ capabilities in the polymer 3D printed mass production parts market.

Of late, Stratasys has been focusing on enhancing its capabilities in the polymer 3D printing space. In connection with this, the company, in February this year, bought RP Support (RPS), a U.K.-based provider of stereolithography 3D printers and solutions. It believes the acquisition will be slightly accretive to its revenues and earnings by the end of 2021.

Prior to that in January, Stratasys completed the acquisition of Origin, a San Francisco-based 3D printing start-up. With this acquisition, Stratasys gained access to Origin One, Origin’s manufacturing-grade 3D printer, which uses its proprietary resin-based Programmable PhotoPolymerization (P3) technology.

The integration has enabled Stratasys to deliver polymer-based additive systems to the dental, medical, tooling, and selected industrial, defense, and consumer goods markets. Additionally, the acquisition of Origin One is projected to generate incremental annual revenues of $200 million within five years. Moreover, the acquisition is anticipated to be accretive to non-GAAP earnings growth by 2023, though it might have a dilutive effect on the 2021 non-GAAP earnings.

We believe Stratasys’ sustained focus on expanding its 3D printing portfolio through acquisitions will drive customer acquisition for the company, thereby boosting its growth prospects in the near term.

Zacks Rank & Key Picks

Stratasys carries a Zacks Rank #3 (Hold), at present.

Better-ranked stocks in the broader technology sector include Microsoft (MSFT - Free Report) , STMicroelectronics N.V.  (STM - Free Report) and NVIDIA Corporation (NVDA - Free Report) , all carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Microsoft, STMicroelectronics and NVIDIA is currently pegged at 11.1%, 5%, and 19.5%, respectively.