Jeffries 3D Printing Reseller Survey Indicates a Miss for 3D Systems (DDD); Stratasys (SSYS) Looks Better

Q3 was soft for 3D printers but worse for 3D Systems (NYSE: DDD), which is especially concerning because of higher consensus expectations, analyst at Jefferies note. More DDD resellers reported being below plan, saw extending sales cycles, and noted greater discounting than Stratasys (NASDAQ: SSYS) resellers. Q3 revenues for SSYS resellers averaged +8% Q/Q (vs. St +1%) and DDD resellers +6% (St +8.5%).

SSYS resellers expect 2016 sales growth of 28% vs. 18% for DDD resellers. Consensus estimates for 2016 revenue growth are 14% for SSYS and 15% for DDD. We see much less risk to 2016 consensus EPS vs. the prior three earnings.

DDD will likely need at least a few quarters of investment to repair its issues in various areas: 1) Damaged reseller relationships/execution; 2) Metal printers: integration of Phenix and LayerWise technologies will take time; 3) Cube: in comparison to minimal H2 expectation for SSYS' MakerBot, we believe consensus assumes a decent ramp for the Cube in H2.

The analyst raised his Q3 SSYS revenue estimate in line with consensus and kept his EPS estimate below at $0.07 vs. $0.08. The below consensus estimate is due to higher opex spending. He also trimed his DDD estimate below consensus to $0.07 vs. $0.09.

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