Spotlight on 3d Stocks: ExOne (XONE) and Stratasys (SSYS)

NEW YORK (TheStreet) -- In any fledgling industry, investors tend to grow skittish at the first sign of trouble, and Tuesday was no different for many three-dimensional printing stocks. Sparking the sell-off, Stratasys (SSYS) and ExOne (XONE) revised their full-year expectations which fell short of Wall Street consensus.

By market open, ExOne plummeted 9.5% to $56.34. Stratasys was beginning to recover from the previous day's falls, climbing 0.46% to $119.92.

After the bell Tuesday, ExOne warned full-year 2013 revenue would be between $40 million and $42 million, below previous guidance of $48 million. Based on the year's results, fourth-quarter revenue would fall in the range of $11.2 million to $13.2 million.

Analysts surveyed by Thomson Reuters had anticipated fourth-quarter revenue of $19.63 million and full-year sales of $48.32 million. The shortfall is related to machine sales yet to be completed for customers in Russia, India, Mexico and France. Those sales still needing approval processing will be deferred into 2014.

The Pennsylvania-based business is due to report fourth-quarter and full-year results on March 19.

Meanwhile, Stratasys, the second largest 3d printing stock on U.S. markets, said full-year net income for the period ending December would be between $2.15 and $2.25 a share and revenue in the range of $660 million to $680 million. Analysts had hoped net income would be at least $2.31 a share, though revenue consensus of $658.48 million was exceeded.

The Israel-based business' profitability will likely take a hit as operating expenses are projected to expand significantly over the year. The company expects to invest heavily in sales and marketing programs and research and development into new product development.

Following the announcements, several analysts weighed in on the sell-off, noting much of the losses were overdone.

Bank of America analyst Wamsi Mohan said Stratasys' guidance sets it up to exceed expectations. The bank reiterated its "buy" rating with a price target of $119.37.

"Potential revenue upside comes from faster organic growth (greater than 25% in the core business), and from higher MakerBot revenues, which are currently assumed in most models around $100 million. Stratasys management team has taken a conservative approach to guidance in 2013 and we expect the same is true in 2014," wrote Mohan in the report.

Likewise, Jefferies reiterated its "buy" rating on Stratasys, with a price target of $155.

"Stratasys guided 2014 revenue above Street, but EPS was below, as the company anticipates increased R&D and investments to expand sales channels. While some will be disappointed by margins, given the early innings of 3D printing, we believe it is absolutely the right thing to do. The better than expected revenue guide, in our view, is the most important takeaway," wrote analyst Peter Misek in the report.

Jefferies also kept its "buy" rating on ExOne with a price target of $72.

"We are incrementally more cautious on management's forecasting abilities; however, we still favor the ExOne's technology and see a large opportunity," said Misek. "The timing and lumpiness of orders makes it a high likelihood that [it] could occasionally miss consensus expectations, especially considering the high multiples."

Slightly more pessimistic, Deutsche Bank kept its "hold" rating on ExOne and downwardly revised its price target to $65 from $55.

Similarly, Canaccord downgraded ExOne to "hold" from "buy" with a price target of $55 from a previous $75.

"While on the surface, XONE's outlook for 40-50% revenue growth is compelling versus 3D peers, multiple revisions to expectations have undermined our confidence in guidance," wrote Canccord analysts in the report. "Absent sufficient confidence in XONE's organic growth outlook, we favor alternative plays in the 3D space with more diversified razor, razor blades revenue models at similar or discounted multiples such as 3D Systems (DDD) and Stratasys respectively."

TheStreet Ratings team rates STRATASYS LTD as a Hold with a ratings score of C+. The team has this to say about their recommendation:

"We rate STRATASYS LTD (SSYS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SSYS's very impressive revenue growth greatly exceeded the industry average of 2.8%. Since the same quarter one year prior, revenues leaped by 152.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • SSYS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.94, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for STRATASYS LTD is rather high; currently it is at 63.63%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -5.27% is in-line with the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry. The net income has significantly decreased by 227.8% when compared to the same quarter one year ago, falling from $5.18 million to -$6.63 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, STRATASYS LTD's return on equity significantly trails that of both the industry average and the S&P 500.

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