3D Systems shares surged 5.93% to $10.01 on Thursday after research firm Stephens upgraded the stock from Equal-weight to an Overweight rating. However, Stephens analyst Ben Hearnsberger maintained his $12 price objective. Shares of the 3D printing company have plunged more than 70% year-to-date amid disappointing quarterly results. The 3D printing sector is going through an adjustment phase.
3D Systems still has room to improve profits
Hearnsberger said in a research note to investors that his industry checks suggest the demand might be subdued, but it is not stationary. Bears have argued that demand in 3D printing sector has become terminal. The analyst added that the stock has fallen to a level from where restructuring initiatives alone could lead to better than expected results in FY2017. About 32% of the company’s total shares are held short.
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Stephens says 3D Systems is like a “self-help” story. It has the opportunity to boost profits even without historical top-line growth rates. The investment firm expects FY2016 to be a year of restructuring, and FY2017 will mark its return to historic profitability. Hearnsberger sees limited revenue growth in the next couple of years with flat gross margins. But the analyst says 3D Systems’ operating expense leverage is going to improve.
Stratasys rallies on 3D Systems’ upgrade
Hearnsberger blamed the “strategic moves” taken by the previous CEO Avi Reichental and “un-achievable expectations set by the market” for the steep decline in 3D Systems’ stock price. Reichental resigned in October after serving as President and CEO of the company for 12 years. Currently, Andrew Johnson is serving as the interim CEO and Chief Legal Officer.
Johnson has announced that the Rock Hill-based company would take “decisive steps” to reduce its cost structure and better prioritize its resources. 3D Systems stock reached an all-time high of $97 in early 2014 as investors thought 3D printing was the next big thing. Its biggest rival Stratasys has also seen its stock decline almost 69% year to date. Stratasys also rallied almost 4% after Stephens upgraded 3D Systems.