FBR Capital Downgrades 3D Systems (DDD) to Market Perform
FBR Capital downgraded 3D Systems (NYSE: DDD) from Outperform to Market Perform with a price target of $48.00 (from $83.00).
Analyst Ajay Kejriwal comments, This follows disappointing 2Q results that included organic revenue growth slowing to only 10% and gross margins compressing 400 bps YOY to 47.8%. Management provided a number of reasons for the 2Q slowdown including voluntary delayed launch of some consumer products and a pushout of orders into backlog. While we understand the rationale for some of the slowdown and expect growth to pick up slightly in 3Q, we see risk to the 25%–30% organic growth that many investors expect for the company. More specifically, increasing competition in the company's core technologies in SLS and SLA will likely result in pressures in revenue growth and/or gross margins."
The analyst added, "We are also concerned that the consumer opportunity that some investors expect from the company may not be realized near term given the gap between the feature-sets demanded of consumer-type products with respect to usability, price, time-to-print, etc., and the current technology offerings and note that the company postponed the shipment of certain consumer products in the quarter. To be clear, we fully expect 3D Systems to remain a dominant player in the evolving 3D printing landscape and expect rapid growth in the company's metal printing and healthcare-related businesses. However, those businesses are relatively small, and a slowdown in the much larger legacy polymer/prototyping markets would be a drag on overall growth and profitability. We move to the sidelines."
The firm revised FY 2014 revenue/EPS estimates to $715 million/$0.77 from $718 million/$0.85.
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Shares of 3D Systems closed at $56.07 yesterday.