3D Systems Corporation, Stratasys, Ltd. Tank After Analyst Downgrades

3D Systems Corporation, Stratasys, Ltd. Tank After Analyst Downgrades

Shares of 3D printer makers 3D Systems and Stratasys plunged today after analysts at Piper Jaffray said their second quarter checks suggest that demand was far lower than expected for both companies. As a result, they expect both firms to miss consensus estimates for the June quarter. They also downgraded Stratasys to Neutral and 3D Systems to Underweight.

HP takes a bite out of 3D Systems and Stratasys

In a report dated July 17, analysts Troy Jensen and Austin Bohlig released the results of their second quarter 3D printing survey. The survey covered feedback from 55 resellers of 3D printers and service bureau operators, most of whom are located in North America. Eighteen Stratasys resellers and 14 3D Systems VARs participated in the most recent survey.

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The Piper Jaffray team said that demand for 3D printing systems was the “weakest in recent memory” during the second quarter. They noted that demand has been “challenging” over the last several quarters, but the second quarter was the worst they have observed in a year. They believe that the reason demand was so weak during the second quarter was “sustained weakness for prototyping-focused machines.”

They also think HP’s new Fusion Jet and Carbon 3D’s M1 platforms made the weakness even worse, and this issue could get even worse from here. They believe that many current resellers of 3D Systems and Stratasys products will partner with HP, which they said will “distract channels and stress relationships.”

3D printing growth expectations still “overstated”

They said 24% of the resellers who participated in their survey said they were above plan in the quarter, while 68% said they were below plan. Three Stratasys and 3 3D Systems resellers said demand was better than expected, while 11 for each said sales were worse than expected. To add insult to injury, they said resellers’ optimism for growth the rest of the year has faded. Overall, resellers expect a 7.7% year over year growth rate for this year, which is a decline from the 11% that was previously expected.

Additionally, Jensen and Bohlig believe this expectation is still “overstated.”

Since 3D printing system sales were so bad during the second quarter, it’s no surprise that material sales also underperformed expectations. However, the Piper Jaffray team was happy to see that material sales improved sequentially. They believe this means that utilization rates are still “robust.” They said 26% of survey participants said they were above plan on material sales during the second quarter, while 29% were below plan.

Stratasys and 3D Systems downgraded

The Piper Jaffray team has downgraded Stratasys and 3D Systems due to their more cautious outlook. They note that although the second half of the year has historically been better for system sales than the first half, they believe the headwinds that have been weighing on demand for the first half of the year will persist throughout the rest of the year. Additionally, they believe both 3D printer makers could see their estimates cut in the second quarter earnings season.

They move to Neutral on Stratasys and Underweight on 3D Systems. Shares of 3D Systems fell by as much as 8.5% to $13.46, while Stratasys stock declined by as much as 10.33% to $20.88 per share during regular trading hours on Monday.

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