3D Systems Corporation (DDD) Price Targets Cut

3D Systems Corporation (DDD) Price Targets Cut
Image Credit: 3D Systems Corporation

3D Systems Corporation (NYSE:DDD) scared investors this week with the profit warning it issued along with its weak earnings preannouncement. Analysts from both Canaccord Genuity and UBS slashed their price targets for the company after this week’s guidance warning.

Now shares of 3D Systems’ stock are hovering around the low end of their 52-week range.

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3D Systems cuts guidance

This week 3D Systems Corporation (NYSE:DDD) reduced its revenue guidance to between $164 million and $169 million. The consensus estimate was $186 million. For non-GAAP earnings per share, the company expects between 16 cents and 19 cents per share. The consensus estimate had been 21 cents per share.

For the full year, the 3D printer company said it now projects between $650 million and $690 million in revenue and non-GAAP earnings of between 70 cents and 80 cents per share. The previous guidance was for between $700 million and $740 million in revenue and between 73 cents and 85 cents per share in earnings. The consensus estimate had been $708 million in revenue and 78 cents per share in earnings for the full year.

3D Systems won’t be in trouble forever

In a report dated Oct. 22, 2014, Canaccord Genuity analysts Bobby Burleson and Prabhakar Gowrisankaran said they think 3D Systems Corporation (NYSE:DDD)’s has a solid positioning in the industry that will eventually override the near-term issues. They maintained their Buy rating but slashed their price target from $75 to $50 per share.

The analysts point out that the 3D printing industry is expected to see a 30% annual growth rate over the next three to five years. They expect 3D Systems to finish this year strong, as the company is ramping up production at its new U.S. manufacturing plant. They think the strong finish will also boost Wall Street’s sentiment on the company.

The Canaccord Genuity team noted that management blamed continued capacity constraints in their direct metals printers. They also point out that the company had to delay the release of its newest consumer product, although both issues had been resolved by the end of the third quarter.

UBS analysts not so positive on 3D Systems

In their report also dated Oct. 22, 2014, UBS analysts Steven Milunovich and Peter Christiansen said the recent pullback in 3D Systems Corporation (NYSE:DDD) shares is a little tempting, but they want to see better execution before they will upgrade the stock. They maintained their Neutral rating and cut their price target from $50 to $41 per share.

The UBS team thinks it will take 3D Systems more than a single quarter to catch up where it should be in terms of metals production. They said they “sense” that throughput is still a challenge even though the second line is up and running. The reason they give is because of how large the guidance revision was. They also note that the guidance range was 20% of the company’s quarterly sales.

They do say, however, that the negative margin impact of getting the new line up and running is probably just temporarily. They note that materials margins rebounded and that there was a modest margin expansion in QuickParts.

For now though, the UBS team expects execution to pressure 3D Systems Corporation (NYSE:DDD)’s multiple in the near term.

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