The rapid adoption of 3D technology solutions among manufactures makes investing in Stratasys (SSYS) worthwhile at this point.
Per Wohlers Associates, an industry consulting and research firm, manufacturers across different industries such as consumer products, automotive, medical and aerospace are using 3D printing technology that is effectively reducing their lead time and also minimizing their costs.
Moreover, favorable forecasts by market research firms such as Gartner, IDC and Canalys boost investors’ confidence in 3D technology. Per Gartner, worldwide shipments of 3D printers will increase at a 95% CAGR to 1.1 million units by 2017. IDC predicted that 3D printer unit sales and installed base will witness a CAGR of 59% from 2012–2017. Canalys expects the global 3D printing market to soar from $2.5 billion in 2013 to $16.2 billion in 2018.
Also, Stratasys has witnessed positive estimate revisions for fiscal 2014 and fiscal 2015. Over the past 60 days, 4 out of the 6 estimates for fiscal 2014 were raised, which led our earnings per share estimate to increase 6.9% to $1.87.
For fiscal 2015, out of 5 estimates 3 positive estimate revisions were witnessed over the same time frame, which helped earnings estimates to increase 8.1%.
Higher demand for Stratasys’ MakerBot products and increased sales of higher-end Fortus and Connex systems remain positives. The company’s traction in the entry-level Mojo and uPrint 3D printers should help it to generate higher revenues, going forward.
The company is planning to invest a significant amount for product development and marketing to complement its growth.
Buoyed by the higher adoption of its 3D technology and printers, Stratasys had raised its 2014 guidance as well. The company also updated its long-term operational targets, which includes a 25% organic revenue growth (previous forecast 20% growth).
Also, the company expects to incur capital expenditures in the range of $50 to $70 million for increasing its manufacturing capacity to cater to the increasing demand for 3D solutions and printers.
Although these investments are expected to impact margins in the short run, product launches and global expansion will help the company generate incremental sales over the long haul. Also, the company’s recent acquisitions of Solid Concepts and Harvest Technologies are expected to benefit its top line, going forward.
While expenses are expected to go up further in fiscal 2014, we consider this necessary to facilitate product enhancements and capacity increases to address growth opportunities. Moreover, considering the expanding market and Stratasys’ strong position within it, we are relatively less concerned about the competition from companies like 3D Systems Corp. (DDD), Voxeljet (VJET) and The ExOne Company (XONE).
Currently, Stratasys sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment