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William Blair Raises Stratasys (SSYS) to Market Perform; Recent Deals, New Products Boost Confidence

February 14, 2014 9:53 AM EST Send to a Friend
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Price: $119.96 --0%

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    19 Buy, 5 Hold, 0 Sell

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Stratasys (Nasdaq: SSYS) shares are largely positive Friday following a key analyst call made ahead of the bell.

William Blair raised its rating on Stratasys from Underperform to Market Perform.

Analyst Brian Drab noted that there were several positives at play in making the call, including: continuing strength in the core business, successful integration of Objet, potential upside to revenue expectations for MakerBot, several new product launches, and the announcement of several new partnerships... With those combined, the analyst sees Stratasys growing EPS by 20 percent over the next several years.

Drab's revenue forecast for 2014 is in-line with Stratasys' management at 39 percent with at least 25 percent organic growth.

On MakerBot, Drab believes management's outlook implies revenue of around $120 million in 2014, which would exceed his original expectations. While the segment reported revs of just $16 million in 2012, the analyst sees MakerBot posting revs of $80 million in 2013.

Recent distribution partnerships with Dell, Micro Center, and The Aurora Group bode well for Stratasys. Drab comments, Dell will offer MakerBot’s printers and scanners to workstation buyers. The Micro Center will offer MakerBot’s printers and scanners in 25 stores across 16 states. The Aurora Group, a large electronics and office supply retailer in China, began carrying the company’s entry-level printers, known as the “Idea Series” (Mojo and uPrint), on January 1, 2014.

New product offerings will also boost Stratasys' performance. Drab cites new MakerBot offering at 2014 CES: the Replicator mini (retail price: $1,375), the next-generation Replicator ($2,899), and the Replicator Z18 ($6,499). He also likes the recently introduced Objet500 Connex3 Color Multi-material 3D Printer, which should retail for $330,000 to $350,000, according to the analyst's estimates.

On valuation: At $118, shares of Stratasys trade at 54 times our 2014 adjusted EPS estimate of $2.20 (consensus: $2.24; guidance $2.15 to $2.25). This multiple is well above the long-term average orward multiple of 30 to 32 times and above the 30 to 35 times average multiple associated with technology companies that we perceive to have growth, margin, and return profiles similar to Stratasys.




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