3D Systems Corporation (NYSE:DDD) stock has been assigned a consensus Hold rating. But Fintrust Brokerage Services analysts Bruce Roberts and Allen Gillespie are bullish on the stock. In a research note dated September 2, Fintrust initiated coverage of the stock with a Buy rating and $57 price target, reflecting a 6.5% upside potential.
3D Systems unlikely to achieve its organic growth target
3D Systems forecasts revenue of $1 billion in FY2015. Fintrust says it’s a reasonable target given the high organic growth rate of the overall industry and the company’s appetite for mergers & acquisitions. The Rock Hill-based company continues to expand its ecosystem through acquisitions, third-party relationships and internal development. Over the past few months, 3D Systems has acquired Medical Modeling, Simbionix, Laser Reproductions and American Precision Prototyping.
The 3D printing company has inked a deal with Google Inc (NASDAQ:GOOGL) to 3D print customizable smartphone components for the Ara project. The research firm estimates 3D Systems to grow, helped by more acquisitions and a resumption of organic growth, 35.8% in the current year and 34.4% in 2015. However, the company will struggle to achieve its 30% long-term organic growth target as its key patents are set to expire between 2014 and 2017.
What’s more, the entry of low-cost Asian manufacturers and giants such as Hewlett-Packard Company (NYSE:HPQ) will pose further challenges. Fintrust estimates that 3D Systems’ organic and M&A-fueled sales growth will fall gradually to reach 23% in 2019. Successful integration of its various acquisitions is another challenge before the company.
3D Systems’s diverse revenue stream a positive
Roberts and Gillespie said the company has acquired 43 businesses between August 2009 and April 2014. Serial acquisitions may present integration issues that could shift the management’s attention away from the underlying business. However, there are several positives about the company. Fintrust said 3D Systems is well-positioned to grow in the rapidly evolving 3D printing market. The company’s diverse revenue streams provide it a shield from the weak performance of one of its segments. For instance, the company’s revenue grew 25% in Q2, 2014 despite just 14% YoY growth in printer sales.
3D Systems shares plunged 1.12% to $52.11 at 10:41 AM EDT on Wednesday.