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3D Systems Being Beaten By Stratasys, Survey Says, But Buyout Rumor Drives Stock

3D printing could be catching on, but not all companies appear to be having the same level of success, according to one firm. 3D Systems shares continue to ride on the buyout rumors that popped up earlier this week, but other signs suggest that Stratasys might be a better pick in the space.

GE said to be interested in buying 3D Systems

On Monday, rumors about General Electric supposedly being interested in buying 3D Systems began to circulate. Supposedly, the company hired an investment banker to look into acquiring the 3D printing firm. This isn’t a new rumor, as we heard this at least as far back as last summer, but pinning down the source responsible for this year’s reboot of the rumor has been difficult. Sites reporting on the rumor are using words such as “chatter” without identifying their sources. Needless to say, it sounds quite suspicious.

In September, GE announced that it was planning to buy two European 3D printing companies, so it wouldn’t be the first time it showed interest in the sector. General Electric picked up Sweden-based Arcam and Germany-based SLM Solutions Group last year, and those two acquisitions helped bolster 3D Systems and Stratasys shares last year.

Demand for 3D printers still growing

As Wall Street pushed shares of 3D Systems higher and higher this week, Piper Jaffray analyst Troy Jensen offered the results of his firm’s proprietary survey on 3D printing during the third quarter. In a research note dated Jan. 9, he said he believes 3D printing experienced a quarter over quarter uptick in the fourth quarter. However, he doesn’t believe all manufacturers experienced that uptick, as signs pointed to weakness for 3D Systems but strength for Stratasys.

He noted that total system demand grew as 30% of 3D printer resellers reported that sales of the systems came out ahead of their expectations. Fifty percent said sales were behind expectations, while the other 20% said sales of 3D printing systems came out about as they had expected. The net result is a negative 20%, but that’s 17 percentage points higher than what Jensen observed in the third quarter.

The analyst notes that historically, the fourth quarter has been the strongest for system sales, but he added that he was “encouraged” that the trend continued in 2016. He also pointed out that this shows that demand for 3D printers continues to grow. Additionally, demand for materials continues to grow, which means that those who purchased systems continue to use them. Looking into those year, many resellers expect a much-improved year for 3D system sales compared to last year.

Survey points to Stratasys beating 3D Systems

Jensen’s survey found that 35% of Stratasys resellers had a better-than-expected quarter, while 35% reported a weaker-than-expected quarter. The other 30% said sales were as expected, resulting in a net neutral 39 percentage points higher than the third quarter. The analyst highlighted that many of those who had a better or in-line quarter for system sales were Stratasys’ larger channel partners in North America and Europe.

On the other hand, the Piper Jaffray survey found weak demand for printers made by 3D Systems. Only 8% of the company’s resellers had a better-than-expected quarter, while 67% said sales were weaker than expected. The other 25% reported that it was an in-line quarter. On net, the result is a negative of 59%, a decline of 2 percentage points from the third quarter result.

Jensen also noted that 3D Systems shares have been rising this week due to the rumor about GE buying the company, but he thinks that this is unlikely. Additionally, he pointed out that the company’s stock price doesn’t reflect its fundamentals, and because his survey indicates weak system sales, he expects another revenue miss when the company reports its fourth quarter earnings.

Shares of 3D Systems rose 1.69% to close at $15.65 on Thursday, while Stratasys shares declined 0.16% to close at $18.84.