Citi Skeptical About 3D Systems Takeover Speculation

NEW YORK ( TheStreet) -- 3D printer maker 3D Systems ( DDD) surged yesterday following Bloomberg reporting that the company had canceled a tentative appearance at a conference, leading to speculation that it could be a takeover target, but Citigroup said today that the company probably wouldn't be acquired. Other 3D printer makers also rallied in the wake of the Bloomberg report. 

BACKGROUND: 3D Systems yesterday canceled a tentative appearance at an August conference sponsored by research firm Pacific Crest, Bloomberg reported. The company reportedly elected not to appear at the conference due to scheduling conflicts that its management had.

WHAT'S NEW: In light of its $7B market cap, 3D Systems is not a realistic takeover target, Citi analyst Kenneth Wong wrote in a note to investors earlier today. Other factors also contributed to the stock's rally yesterday, the analyst stated. 3D Systems' announcement of a date for its second quarter earnings report yesterday likely eliminated any risk of a negative pre-announcement by the company, Wong wrote. The stock was likely also boosted by positive news about 3D bio-printing, the analyst stated. Bio-printing is several years away and the sector's rally was "a bit too extreme," even though positive sentiment about the removal of risk from 3D Systems' results is understandable, Wong believes. He kept a Neutral rating on 3D Systems.

WHAT'S NOTABLE: Both Wong and JPMorgan analyst Paul Coster were more upbeat today about another major company in the sector, Stratasys (SSYS). Coster raised his price target on the name to $138 from $104. He believes that 3D Systems is trading at a significant premium to Stratasys and he kept an Overweight rating on Stratasys and a Neutral rating on 3D Systems. Similarly, Wong wrote that the rally in Stratasys' stock last month was steadier and more sustainable than the surge experienced by 3D Systems. He identified Stratasys as his top pick in the sector and kept a Buy rating on the shares.

PRICE ACTION: In late-morning trading, 3D Systems lost 2% to $62.20, while Stratasys rose 0.4% to $116.73. Other companies in the sector fell like 3D Systems, with Voxeljet (VJET) dropping 8.7% to $23.65 and ExOne (XONE) sliding 3.7% to $43.30.

Reporting by Larry Ramer.

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