Analysts at UBS lowered their 12-month price target and fiscal 2015 earning and revenue estimates for 3D Systems prior to the release of its second-quarter financial results on Thursday, August 6.
The stock price of 3D Systems declined nearly 2% to $13.58 per share around 12:28 in the afternoon in New York today.
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3D printing requires use case expansion to fuel growth
In a note to investors, UBS analysts Steven Milunovich and Peter Christiansen reiterated their concern regarding the fact that 3D Systems would not be able to provide assurances the demand is improving.
Milunovich and Christiansen noted that 3D Systems did not pre-announce its financial performance for the second quarter. The company also removed its 2015 guidance in the previous quarter.
The analysts also stated that the read-through from Stratasys indicated the continued decline of growth in end-market demand is more than just a temporary pause. According to Milunovich and Christiansen, they still believe that there is a large opportunity for 3D printing to become disruptive, but it requires a “use case expansion to fuel the next leg of growth.”
3D Systems product portfolio is less cohesive
Milunovich and Christiansen said 3D Systems is focusing on business aspects that it can control such as retooling its go-to-market and optimizing costs. They also noted that the company finds opportunity from unfilled coverage gaps in its channels.
They also noted that 3D Systems haven’t revealed strategies to achieve revenue synergies from its recent acquisitions. According to them, “We remained concerned that company’s product portfolio is less cohesive than most tech firms.”
UBS price target, earnings and revenue estimates for 3D Systems
Milunovich and Christiansen lowered their 12-month price target for 3D Systems from $18 to $10. The analysts explained that their price target was based on a target P/E multiple of 15x on their lowered 2016 EPS versus their previous target multiple of 21x.
For fiscal 2015, the analysts reduced their earnings estimate for 3D Systems by more than 50% to $0.32 per share. Their revenue estimate declined from $752 million to $720 million. They think the company’s organic and overall growth will decline 10%.
Milunovich and Christiansen also cut their 2016-17 estimates for 3D Systems by approximately 30% with expectations for mid-teens acceleration in growth and a 14% increase in operating profit. See chart below: