Stifel Says Stratasys' Earnings Leverage 'Disappeared,' Downgrades To Hold

Patrick Newton of Stifel on Wednesday downgraded shares of

to Hold from Buy (with no established price target following a previous $110 estimate) following the company's conference call to discuss its preliminary 2014 and 2015 guidance and its newly announced investment plan. "On the call we were focused on expectations for the duration of expected operating expenditure investments, with our thesis hinging on whether or not Stratasys would be able to generate leverage in either pro forma earnings per share, or EBIT in our modeling horizon," Newton wrote. "From management's comments increased investments are expected to last at least two to three years, with the horizon for achieving its long-term operating model expected to be five years away." Newton adds that following the company's comments that involves "significant sustained" increases in operating expenditure, shares are not only being downgraded but also removed from the Stifel Select List as earnings growth expectations are now "meaningfully reduced." Newton is lowering his pro forma earnings per share growth expectations from 25.7 percent in 2015 and 26.3 percent in 2016 to 8.1 percent and 19.5 percent respectively. The analyst also believes that the company's leadership in the consumer segment appears "challenged" as growth expectations for MakerBot have slowed, with revenue expansion in 2015 expected to be "minimal to non-existent."