Story updated at 10 a.m. to reflect market activity.
3D Systems gained 3.1% to $46.20 in morning trading.
The firm reiterated its "neutral" rating for the 3D printer maker. The price target cut is a valuation call according to UBS analysts Steven Milunovich and Peter Christiansen.
"The almost 10% stock price decline following earnings appears a bit strong in reaction to the decline in printer gross margin and the perception that operating leverage improvement is delayed," the analysts wrote. "We expect the printer margin to bounce back as the decline is attributable to ramp up costs of the 24 new products introduced rather than to price pressure. The gross margin should tick up sequentially through the year. In addition, management notes its views on operating leverage have not changed, with a step change in 2015 and full realization in 2016 on the way to a 30% operating margin target."
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Separately, TheStreet Ratings team rates 3D SYSTEMS CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate 3D SYSTEMS CORP (DDD) 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, premium valuation and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DDD's very impressive revenue growth greatly exceeded the industry average of 4.1%. Since the same quarter one year prior, revenues leaped by 52.4%. 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.
- Although DDD's debt-to-equity ratio of 0.02 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 3.97, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to its closing price of one year ago, DDD's share price has jumped by 47.22%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Computers & Peripherals industry and the overall market, 3D SYSTEMS CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: DDD Ratings Report