Brean Capital Downgrades Stratasys Following Monday's After Market Plunge

Shares of

plunged more than 20 percent after Monday's market close after the company issued weak guidance including a sales projection of $940 million to $960 million in fiscal 2015 and a projected earnings per share of $2.07 to $2.24. Ananda Baruah of Brean Capital on Tuesday downgraded shares to Hold from Buy with no assigned price target following the company's guidance. The analyst notes that Stratasys also announced it will take a $100 million to $110 million write-down for MakerBot which may suggest the acquisition will be a “headwind for the foreseeable future.” In addition, the company's guided operating expenditure as a percentage of revenue in 2015 will be 46 percent to 47 percent, a 200 basis point increase year over year. Stratasys also stated that it sees demand for design and manufacturing enterprise solutions remaining robust in 2015 as it recently added a professional services team that identifies applications of 3D printing and educates customers on best practices for workflows. Baruah does note that this move is consistent with the company's prior commentary of attempting to initiate C-level discussions to cultivate broader adoption of its products across an organization instead of doing so on a case by case basis working with various managers within an organization. Bottom line, following Monday's aftermarket plunge which carried over in to Tuesday's pre-market session, shares are trading at approximately 27x 2015 earnings per share estimates. “We believe, given the current profile, that 20x-35x makes the most sense, and, if that holds merit, then the stock could trade in a rage of $45 to $75 near term, with the current price in the middle of that range,” Baruah wrote. “Given the revenue growth of the company (25 percent plus), Stratasys can looking interesting on 2016 earnings per share (say $2.65 EPS X 30x = $80 stock), but we believe this will remain a show me story for a period of time.”