3D Systems Shares Down After JPMorgan Downgrade

Shares of 3D Systems Corporation

fell as much as 4 percent in Tuesday's pre-market hours after JPMorgan downgraded the stock to Underweight despite better-than-expected quarterly results pushed the stock up 25 percent on Monday. Analyst Paul Coster of JPMorgan cut his rating on DDD to Underweight from Neutral on valuation lack of catalysts, and limited near-term visibility. However, he increased the price target to $10 from $9. "We believe the stock overreacted positively yesterday (up ~25%vs. S&P flattish) primarily owing to a short squeeze, and we think much like near peer Stratasys, Ltd.

, investors are pricing in unrealistic expectations of a V-shaped recovery," Coster wrote in a note to clients. "We think the stock's ~68%YTD performance(S&P down 1.8%)is a bit excessive given no clear signal end market demand is sharply rebounding (SSYS FY16 Outlook calls for 3% growth/DDD expects flat to slightly up), leaving minimal margin for error for this execution story," Coster added. DDD's quarterly earnings topped Street view on cost savings and lower operating expenses. The company reported earnings of $0.19 per share, $0.11 above the Street's consensus. Revenue of $183.36 million also came in ahead of expectations for $182.88 million. Management expects FY16 demand up slightly or flattish, but with significant unevenness and volatility throughout the year. "While the quarter is encouraging, we note that long-term cost profile questions remain, and demand still has not improved (2016 guided to flat to slightly positive)," Goldman Sachs analyst Samuel Eisner said in a client note. Eisner maintained his Neutral rating on the stock, but raised the price target by $1 to $10. "The sector is sentiment driven and we do not yet feel investors are ready to place a "growth" multiple on shares, which keeps us Neutral. DDD is currently trading at 26x CY17 PE and unlikely to see multiple expansion until investors are convinced that growth and execution will arrive in a more linear fashion," Citi analyst Kenneth Wong wrote in a note to clients. Wong has a Neutral rating and $10 price target on DDD stock, which closed Monday's regular trading at $14.45.