JPMorgan analysts Paul Coster, Mark Strouse and Paul J Chung maintain their Neutral rating for 3D Systems Corporation (NYSE:DDD) as the company’s product innovation surprises at the EuroMold and CES conferences.
Following a torrent of product announcements at the EuroMold and CES conferences, as well as management commentary targeting ~30% organic revenue growth over the next few years, we are increasing our FY14-15 revenue estimates for 3D Systems Corporation (NYSE:DDD). We are also increasing our EPS estimates although, like others in the industry, 3D Systems Corporation (NYSE:DDD) is ramping opex aggressively which will likely weigh on margins through 2014, possibly into 2015. Our YE14 price target goes to $67. We maintain our Neutral rating and look for pullbacks before potentially adding to positions.
3D Systems (DDD) was the star of the CES 2014 show
3D Systems Corporation (NYSE:DDD)’s products and services have proliferated dramatically in the last year and the pace of innovation seems to be accelerating with several major initiatives being unveiled at CES literally weeks after what seemed like a difficult-act-to-follow at EuroMold. Each of the product initiatives seems capable of sparking a major new market opportunity in the consumer and retail sectors, and of doing disruptive damage to some existing business models. The CEO highlighted the success that the firm has had in integrating acquisitions and deriving innovation from them; even the previously-maligned Z-Corp acquisition seems to be paying off now with the introduction of multi-color printing.
3D systems’ organic revenue growth
Management expects organic revenue growth of ~30% for the next few years, leading to a doubling of revenue. Both the CFO and the CEO expressed confidence that revenue will accelerate owing to the massive line up of new products and services, but go-to-market will require some patience, so the pay-off will probably be in late 2014 or 2015, but in the meantime, industrial/auto/aerospace and healthcare are driving professional systems growth, and the CUBE is probably gaining traction.
Our FY14 PF EPS goes to $1.22 on revenue of $667mm, up 31% y/y (Street: $1.31/$670mm). Our FY15 PF EPS goes to $1.67 on revenue of $851mm, up 28% y/y (Street: $1.73/$865mm).