Bank of America Reiterates Underperform on 3D Systems and Lowered PT on Lower LT Margin

In a report published Monday, Bank of America Merrill Lynch analyst Wamsi Mohan reiterated an Underperform rating on 3D Systems Corp. DDD and lowered the price target from $60.00 to $55.00 to better reflect underperforming consensus margins. Mohan noted 3D Systems investment in Project Ara, a modular phone with preferences able to be swapped or upgraded on user preference. Bank of America analyzed the penetration of Ara phones into Android smartphone shipments and reported that 3D Systems operating margins declined as early as 2015/2016. The analyst pointed out the lower margin revenue from the project and "inferior" returns. Bank of America commented, "We envision a scenario where 3D Systems ends up as a service provider for the Google Ara project, getting orders for a certain number of units, and in turn, building and shipping those units. As such, 3D Systems' margins should trend towards service provider margins with the benefit of lower material costs. In our opinion, operating margins will be 22% or lower (more likely) for this project relative to overall company consensus projections of 22% in 2015 and 27% in 2016." Shares of 3D Systems Corp. closed at $59.07 on Friday.