3D Systems Corporation (NYSE:DDD) stock surged higher, last week, breaking its long-term negative trend. Investors were concerned about competition from companies such as Hewlett-Packard that will enter the 3D printing segment this year. However, a report from Seeking Alpha by ONeil Trader argues that the company is poised to achieve significant upside in the near future. Also, it was noted that lower profitability expectations will be over soon, as the company is shifting its focus to enhance the bottom line.
According to the author, investors have been more focused on the negatives of the company: margin compression and no guidance to the upside. According to the management at 3D Systems Corporation (NYSE:DDD), operating leverage will be achieved in the second half of 2015, forcing investors to focus on the bottom line. Revenue is expected to increase, which will further enhance expected earnings.
Management has also maintained its financial year 2014 guidance, and said that growth will increase in the second half of the year. Analysts are expecting an increase of 36% and 38% revenue growth in the third and fourth quarter, respectively, which is conservative compared to the company’s revenue growth of 44% in the first quarter.
3D Systems numbers to improve
3D Systems Corporation (NYSE:DDD) acquired Robtec, which will raise the top-line expectations and the full year guidance will also be raised after the company completes the acquisition. The report by ONeil Trader suggested that the revenue for 2014 will be above the high-end of management guidance. Also, annual revenue growth is estimated between 40% and 45% as above the analysts’ expectation for 37.5%. The higher revenue growth will be counterbalanced by the higher level of investments and earnings may not come in very high. Earnings per share for financial year 2014 could be between $0.85 and $0.90 against the current expectations for $0.82, according to the analyst
The author feels that series of positive developments will move the share price higher. Also, there will be an increase in the buying of shares and short covering in the wake of higher revenue guidance revisions and a bottoming price pattern. He has set a $70 year-end price target for the shares. In the report, ONeil also mentioned about Stratasys, which he feels will perform better than 3D Systems Corporation (NYSE:DDD) this year, as its forward valuation is more compelling.