Jul 27, 2016 | By Benedict

Financial research firm Piper Jaffray has downgraded Stratasys from “Overweight” to “Neutral” following a reduction in demand for the 3D printing giant’s products. The firm also lowered the rating of 3D Systems from “Neutral” to “Underweight.”

Could there be dark days ahead for the 3D printing industry? Troy Jensen, a leading investment analyst at financial research firm Piper Jaffray, has downgraded the ratings of both Stratasys and 3D Systems in light of falling demand for their 3D printing equipment and services. He cut 3D Systems from Neutral to Underweight and lowered his price target from $12 to $10.25.

"Following our Q2 checks, we believe 3D Systems saw a significant slowdown in 3D printer demand in Q2, and our checks suggest demand was more challenging than ever," Jensen said of the 3D Systems downgrade. "As a result of poor demand and internal challenges, we have become more cautious onDDD's near term outlook. We believe the competitive landscape continues to intensify, channel relationships remain stressed and any cost cuts DDD can find will likely be offset by increased spending on R&D and Service/Support. Given DDD is trading at a significant EV/Sales premium versus SSYS, we see more downside for DDD versus SSYS. We believe DDD will see estimates reduced and have lowered our revenue and EPS estimates below consensus."

And he downgraded Stratasys from Overweight to Neutral and cut his price target from $32 to $24.

"Following our Q2 checks and results obtained from our quarterly 3D printing survey with Stratasys channel partners; we believe the industry saw a significant slowdown in system demand in the June quarter." Jensen said of the Stratasys downgrade. "Although our checks sounded modestly better than our conversation with 3D Systems VARs, the overall tone remained extremely negative and system demand has seemed to have hit a recent low. Although the 2H of the year is historically better for system sales, we believe the headwinds currently affecting demand likely prevail throughout the year. In turn, we believe Stratasys is at risk of seeing another round of estimate cuts, and we have lowered our 2016 and 2017 revenue and EPS estimates below consensus."

After conducting a survey on demand trends in the 3D printing industry, Jensen concluded that market sentiment could be contracting rapidly. The survey on 3D printing trends showed that, while 17% of Stratasys resellers experienced an above-plan quarter, 61% posted disappointing results. “We believe the weakness was spread across the company’s entire portfolio, and system growth in each product category slowed for the third consecutive quarter,” Jensen said. Stratasys recently conducted its own research on how professionals are using Stratasys 3D printing technologies.

Stratasys’ revenue estimate for Q2 has been lowered by $1.8 million to $170 million, while the revenue estimate for 2016 has been lowered by $15 million to $700 million. A slightly higher demand is, however, expected towards the end of the year due to seasonality. Sales estimates for 2017 have been reduced by $36.6 million to $750 million. Stratasys posted its latest earnings on May 9, reporting earnings of $167.90 million during the quarter, slightly above analyst estimates of $165.11 million. Revenue for the quarter was, however, down 2.8% on a year-over-year basis. According to Jensen, a potential cause of the falling interest in Stratasys and 3D Systems products could be the emergence of HP’s Jet Fusion 3D printer, a commercial-level machine which could draw customers away from the established 3D printing brands.

Ultimately he writes that the second-quarter survey results were "the poorest we have seen in recent memory," and the analyst advises investors to become more cautious on both companies.

While many other 3D printing companies are performing strongly, the failure of two industry leaders could be seen as a worrying omen for the additive manufacturing industry as a whole.

 

 

Posted in 3D Printer Company

 

 

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