Stratasys (SSYS): Dougherty Defends Stock Below $90/sh

Dougherty & Co reiterated a Buy rating on Stratasys Inc. (NASDAQ: SSYS) with a price target of $139. Analyst Andrea James said she was defending the stock below $90, valuation presents a compelling entry point.

"Year‐to‐date, Stratasys shares have sold off from a high of $138 to below $90. The primary reasons for this sell‐off are 1) a market reset on the multiple given to high‐value growth stocks, 2) earnings estimates declines for SSYS based on near‐term ramping expenses, 3) misplaced fears over HP’s and Autodesk’s entry into the 3D printing market and 4) street distaste for SSYS’s acquisition of two service bureau firms for ~$300mm. Stratasys shares declined again on Thursday after ExOne (XONE, NR) missed earnings estimates – even though XONE and SSYS do not serve the same markets," said James.

"We believe the sell‐off has created a compelling opportunity for investors wanting exposure to the 3D printing space. We like Stratasys for the following reasons: 1) It has maintained the industry leading position for more than a decade and holds about 55% unit market share at the professional end of the market. The nearest competitor, 3D Systems (DDD, NR) holds about 18% market share. 2) Street earnings estimates should have bottomed for Stratasys and may climb again in July after the company updates guidance to include acquisitions of Solid Concepts and Harvest Technologies. 3) There may be more than meets the eye with the service bureau acquisitions. Several key patents in stereolithography and laser sintering are due to expire at the end of May and in 2014. This could open the market for Stratasys to expand its offerings organically, or through acquisition particularly if valuations of metals printing companies fall. Either way, the service bureau acquisitions bring know‐how in sintering processes. And finally, 4) the earnings multiple on FY15 has compressed to a number that may be below the percentage earnings growth. Given this, we may soon see an inflection point on Stratasys shares," she said.

For an analyst ratings summary and ratings history on Stratasys Inc. click here. For more ratings news on Stratasys Inc. click here.

Shares of Stratasys Inc. closed at $88.44 yesterday.

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