Brean: Stratasys Has Broad-Based Demand Weakness

In a report published Tuesday, Brean Capital analysts maintained a Hold rating on Stratasys, Ltd. SSYS, saying that systems were soft as expected, while consumables usage was solid. Stratasys reported its March quarter revenue and EPS at $172M and $0.04, respectively, in-line with their pre-announcement. The company reaffirmed its updated revenue and EPS guidance for 2015 at $800M-$860M and $1.20-$1.70, indicating a strong seasonal rebound in revenue in the back half of the year, along with a healthy OM rebound (from 5-10 percent in 1H15 to mid-teens in 2H15). "Given that the mid-point of '15 EPS guidance is currently $1.45 and that we believe a reasonable starting point for '16 is currently $2.00 +/-, we believe that the stock could trade in the $30 - $40 range for the foreseeable future," the analysts said. The company witnessed "broad-based demand weakness" across most of its geographies and industries. The exceptions were consumables and customer support, which were in-line with expectations. The EPS estimates for FY15 and FY16 have been reduced from $0.75 to $0.57 and from $0.88 to $0.58, respectively. In the report Brean Capital noted, "SSYS's 8 new Connex products intro'd in 2H14 that "rounded out" (our term) its Connex Triple Jetting Technology portfolio has resulted in slower-than-expected adoption of the high-end Connex platforms within the channel and delays in customer purchases. SSYS is being impacted by longer evaluation cycles at a time that industrial sales cycles have lengthened." Stratasys announced that it had signed what may be a "very significant win" with Airbus.