Former high flying stock, 3D Systems, was downgraded today by analysts at Piper Jaffray. The stock was cut from a “neutral” rating to an “underweight” rating and price target was reduced from $32 to $21. The 3D printing industry saw record revenue of $3.3 billion last year, a 34% growth rate since 2013. However, 3D printing is still a very young, new industry that will take a while to achieve the hearty returns that it may well one day bring in once the 3D printing revolution continues to gain steam.
Poor preliminary first quarter earnings puts 3D Systems behind for 2015
Releasing preliminary earnings seems to be a trend in the 3D printing industry, according to 3DPrint.com. Unfortunately, 3D Systems released preliminary results just three days ago estimating revenue from first quarter to come in somewhere between $158 and $160 million. Additionally, non-GAAP earnings per share are estimated by company to come in between $.02 and $.04 per share. These preliminary results are significantly different from analysts’ estimates, which stood at earnings per share of $0.17 on revenue of $183.5 million. The significant different in expectations prompted Piper Jaffray analyst Troy Jensen to comment that results are being impacted by “challenging macros, FX headwinds, weak printer demand, and continued poor channel management.” Jensen commented that the missed earnings report highlights weak underlying issues at 3D Systems.
Full year 2015 and 2016 EPS Cut
Piper Jaffray is concerned about the company’s long term prospects due to management’s poor communication and ability to squeeze out new competitors in the 3D printing space. Basically, these factors are what Piper Jaffray considers to be a “depressed competitive state” for the company. These long term concerns prompted analysts to cut full year 2015 and 2016 earnings per share. Full year 2015 earnings per share was cut from $0.85 to $0.43 and full year 2016 earnings per share was slashed from $1.20 per share to $0.81 per share. As you can see, these are some significant cuts to full year earnings and certainly highlights the concern that Piper Jaffray has for the company.
Overall, 3D Systems is in a difficult position right now. The company is struggling to operate efficiently and the lack of communication with lack of competitive edge has really hurt the company to the point where analysts see significant cut backs at the company and a negative effect over the long term.