Although Voxeljet AG (NYSE:VJET) reported very solid revenues on Thursday in its latest report, the company’s costs were much higher and revenue guidance was below expectations. Now analysts at Jefferies have cut their price target for Voxeljet AG from $40 to $27 a share, saying the company’s valuation is just too high.

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Breaking down Voxeljet’s earnings

Voxeljet AG (NYSE:VJET)’s revenue did surpass expectations coming in at €3.7 million. The company posted losses per share of €.85. Wall Street had been expecting to see earnings of €.01 per share rather than losses.

However, the company only delivered three printers during the fourth quarter. It had promised four of them, but now management says they expect the fourth to ship during the first quarter. Voxeljet AG (NYSE:VJET) reported gross margins of 41.3%, which is lower than consensus at 45.5%. The company noted a 920 basis point impact because it introduced its Long Term Cash Incentive Plan.

Operating expenditures were €3.6 million, which was significantly higher than Wall Street expectations of €1 million. This added €2.3 million quarter over quarter, including €548,000 from the incentive plan and costs of €105,000 related to the company’s initial public offering. Voxeljet AG (NYSE:VJET) also reported a backlog of €4.1 million with seven printers expected to ship by the end of this calendar year. However, the average selling price of the printers which are in backlog declined by 25%.

Voxeljet makes some progress

In a report dated March 28, 2014, Jefferies analyst Peter Misek and his team reiterated their Hold rating while also slashing their price target. They note that Voxeljet AG (NYSE:VJET) has made some progress in cleaning up some of the issues from its third quarter earnings report. Investors had been concerned about the nature of the sales of the three printers in the third quarter. The company itself financed one of the printers, while research services to be received partially paid for the other two.

During the fourth quarter, however, none of the printers which were sold had a research payment and just one of them was financed. Of the seven printers Voxeljet AG (NYSE:VJET) has in its backlog, none of them are financing. However, the company stated in its regulatory filing that it still see “material weakness regarding internal control” over its financial reporting.

Looking ahead into 2014

Looking ahead for this year, Voxeljet AG (NYSE:VJET) expects revenues to be at least €18 million, which would be a 50% increase year over year. It expects to see systems make up 60% while service will make up 40% of it. The company expects out-years to grow by more than 50% and guided to gross margins of between 40% and 45%. That includes the incentive comp plan, but the Jefferies team doesn’t think this will be as big of an issue as it was in the fourth quarter.

They expect Voxeljet AG (NYSE:VJET)’s 2014 revenues to be loaded mostly into the second half of the year because of the timing of its expansion into Germany and also the company’s recently announced certain center, which is planned for Detroit. They note that Voxeljet AG (NYSE:VJET) didn’t report any kind of pushback from foundry customers like ExOne Co (NASDAQ:XONE) did. However, they’re not sure if Voxeljet will have to move toward a vertically integrated service model too.

Voxeljet AG (NYSE:VJET) said it expects to launch new cement and ceramic materials, with one of them being released by the end of the year. The Jefferies team suspects it will be the cement product.