William Blair Notes Several Positives from 3D Systems' (DDD) Investor Day; Still Sees Challenges

June 19, 2013 11:33 AM EDT
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William Blair comments on 3D Systems (NYSE: DDD) following an Investor Day held last Monday. The firm has 3D Systems at Underperform.

Analyst Brian Drab noted five takeaways from the event related to management's comments on growth objectives:
  • Expansion of its health care portfolio by focusing on patient]specific medical
    devices and personalized products;

  • Expand Quickparts into new markets and geographies, not to mention markets where its already offered;

  • Management said 2013 will be the year with the the "most exciting" new product introductions. Drab wasn't clear if that referred to number of introductions, revenue gained from the introductions, or another metric;

  • Focus on building customer presence via the Cubify platform and enhanced retail presence. Drab noted, "Management alluded to the next]generation Cube model, which may sell for less than $1,000, and hinted toward the possibility of a model that could break the $500 price point (to be introduced in the next 12 to 18 months)"; and

  • Consolidation of Alibre Gromagic, Sensable, and Rapidform brands into the Geomagic Solutions brand. Several levels will be offered to sell to engineers.

Drab also offered the following thoughts on valuation of 3D Systems:

We continue to have a positive outlook for the additive fabrication industry; however, we believe expectations for 3D Systems are too high and that many investors are buying shares of this company, at least in part, for the wrong reasons. Shares of 3D Systems trade at 46 times our 2013 EPS estimate.well above the long]term average forward multiple of 30]32 times (and well above the 33 times average forward multiple associated with technology companies that we perceive to have growth and margin profiles similar to 3D Systems). Recent financial performance reported at 3D Systems has been impressive, but we believe media hype has led investors to overlook some key fundamentals of this company, and ultimately given rise to unreasonable growth expectations and inflated valuations.

For an analyst ratings summary and ratings history on 3D Systems click here. For more ratings news on 3D Systems click here.

Shares of 3D Systems closed at $47.78 yesterday.

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