Stratasys Worth the Risk as Sales Show Signs of 3D Life
NEW YORK (TheStreet) -- Stratasys (SSYS) - Get Report is showing some signs of life at a time when competition within the 3-D printing industry has investors questioning which companies will survive.
Ahead of Monday's results, investors were wondering whether Stratasys still had a future. Shares were down 25% on the year. But since the Eden Prairie, MN.-based company reported better-than-expected fourth-quarter revenue results Monday, investors looking for a contrarian candidate can do well here.
Among its rivals, only 3D Systems (DDD) - Get Reporthas suffered more, losing almost 60% of its value during that span.
SSYS Year to Date Price Returns data by YCharts
Bets placed on the 3-D printing industry had been a losing one, based on the stocks' performance in the last 12 to 18 months. But with Stratasys stock down more than 52% from its twelve-month high of $130.83 new investors are taking less risk. And with fourth-quarter revenue surging 40% year over year, coupled with 29% year-over-year organic revenue growth, there's plenty of potential for investors to make money.
Shares were recently rising 1.6% to $63.05, trimming its 2015 decline to about 24%.
Plus, the stock has an average analyst 12-month price target of $70, meaning that on average, Wall Street expects roughly 13% gains from current levels.
After 10% year-over-year earnings growth in 2014, analysts project Stratasys to grow earnings at an annual rate of 20% in the next five years. And investors should be as bullish for several reasons.
First, with more than 110,000 3-D printers sold as of the fourth quarter, Stratasys has the largest installed base of 3-D printers in the world, besting larger rival 3-D Systems. And though Hewlett-Packard (HPQ) - Get Reportis expected to release its own 3-D printer next year, HP will have a tough time narrowing that gap.
Stratasys' lead now allows it to capitalize on incremental revenue from its proprietary 3-D printer consumables and accessories at high mark-up prices, especially as its installed base grows.
And like HP, which benefited from its inkjet and laser printers by selling ink, toner, ribbons and other accessories at high margins, Stratasys will be able to generate recurring revenue for years to come. The company, based on consumables revenue growing at more than 30% year over year, is showing signs it can monetize its user growth.
To that end, coupled with ongoing value creation from its MakerBot acquisition, Stratasys looks poised to turn things around much sooner rather than later.
Stratasys is now positioning itself as a 3-D printing leader. And with the stock down from its recent highs and the company showing improved 3-D printing growth prospects, investors should buy these shares and hold for the long term.
This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.
