Slow consumer adoption and new competition from HP could mean bad things for 3D Systems
3D Systems isn’t scheduled to release its next earnings report until Feb. 26, but the company’s shares have taken a nosedive thanks to disappointing earnings and guidance from Stratasys. Shares of 3D Systems declined as much as 9.42% to $27.40 per share during regular trading hours.
Meanwhile competitor Stratasys’ shares plunged by as much as 32.24%, falling as low as $54.27 per share today.
This year has been a record-breaking year for initial public offerings with companies going public via SPAC mergers, direct listings and standard IPOS. At Techlive this week, Jack Cassel of Nasdaq and A.J. Murphy of Standard Industries joined Willem Marx of The Wall Street Journal and Barron's Group to talk about companies and trends in Read More
Stratasys’s guidance is ominous for the industry
Last night Stratasys said it expects this year’s revenue to be between $940 million and $960 million. The company expects non-GAAP earnings to be between $2.07 and $2.24 per share. The consensus estimates were $1.01 billion in revenue and $2.91 per share in earnings.
Seeking Alpha contributor AtonRa Partners states that slow growth on the consumer side of the 3D printing industry is the main reason for the weak guidance. As a result, the weak numbers are a warning sign not only for Stratasys but also other 3D printer manufacturers, including 3D Systems.
HP could be trouble for 3D Systems, Stratasys
Another big problem for Stratasys and probably 3D Systems as well is Hewlett Packard’s entry into the 3D printing business. Analysts at AtonRa believe HP poses a major threat for both companies, potentially pressuring revenue growth at 3D Systems and causing 3D and Stratasys to up their spending on research and development.
They also believe that many potential buyers of 3D printers will wait until the second half of the year to see what HP’s printers look like before deciding which company’s printers to buy because Terry Wohlers spoke so highly of HP’s offerings. Hewlett-Packard is expected to unveil the features and full details of its 3D printer slater this year ahead of next year’s commercial release.
Because of HP’s entry into the market, the AtonRa team believes organic growth at smaller 3D printer manufacturers will not pick up this year and may even keep decelerating, particularly in the second half of this year.
What Stratasys’ report means for 3D Systems
The analysts think that when 3D Systems does report, its guidance will also have to be very cautious. They don’t expect to see any improvements in the company’s margins because it will have to speed up its research and development projects in an attempt to keep up with heavyweight HP and also Stratasys, which is now spending heavily in this area
They estimate 3D Systems organic revenue growth may only be about 15% in the next few years and that margins could keep falling as competition continues to place pressure on the company. They’re estimating growth of only 10% in earnings per share or possibly as high as 20% to 30% if counting possible acquisitions.
As a result, they see “significant” downside risk to 3D Systems’ earnings report because consensus estimates suggest a greater-than 40% growth rate in earnings for his year.