3D Systems Corporation Signs Unexpected Deal With GM

3D Systems Corporation Signs Unexpected Deal With GM
Image Credit: 3D Systems Corporation

3D Systems Corporation (NYSE:DDD) has won a deal with General Motors Company (NYSE:GM) that could boost its September quarter revenue. Piper Jaffray analyst Troy Jensen said in a research note Tuesday that the deal could be worth between $6 million to $8 million. 3D Systems shares jumped 2.6% on Tuesday after the report and rose another 0.75% to $49.50 on Wednesday.

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GM purchases 11 iPro 8000s from 3D Systems

The deal could increase 3D Systems’ September quarter revenue as it was a sudden, unplanned purchase. Wall Street expects the company’s Q3 revenues to come in at $27.9 million. Jensen said the Detroit automaker witness a heavy rainfall, causing a flood in its Rapid Prototyping unit which ruined several machines. General Motors has either purchased or ordered 11 iPro 8000s that cost $600,000 each. It also bought two SinterStation in September quarter.

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Piper Jaffray reiterated its Neutral rating on the stock with $50 price target. Meanwhile, Morgan Stanley issued a report earlier this week highlighting investors’ profit margin concerns. Morgan Stanley analysts spoke to several investors. The research firm said investors were worried about 3D Systems’ long-term margin pressure as competition continues to increase. They also expressed concerns about the need to invest in R&D and marketing, potential OEM entrants, and high-cost materials.

3D Systems’ fundamentals improving

However, Morgan Stanley analyst Scott Schmitz said such concerns are overblown. He believes new product launches, rising end demand and expanding distribution network should fuel the company’s organic growth rate. Schmitz has a Cautious rating on 3D printing sector as a whole. 3D Systems’ organic growth came in at just 10% during the second quarter. But the company is confident of achieving 30% organic growth rate

Last week, Canaccord Genuity analyst Bobby Burleson said 3D Systems’ fundamentals have started improving and a rally in the stock is imminent. Canaccord Genuity has a Buy rating on the stock with $75 price objective, reflecting a whopping 50% upside potential. Addition of Phenix revenue into its organic revenue calculation would boost organic growth.

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