Stratasys Demand Environment Still Weak, BoA Warns After Meeting Execs

BofA Merrill Lynch’s Wamsi Mohan maintained an Underperform rating for Stratasys, Ltd. SSYS, with a price objective of $23, citing a weak demand environment and low visibility.

Weak Demand To Play Spoilsport

Analyst Wamsi Mohan expects Stratasys to record flat product revenues for F16, following an 18 percent y/y decline in 2015. A meeting with company officials revealed that although management is focusing on working capital management, operational expense reduction and optimization of its manufacturing footprint, weak demand is likely to exert pressure.

While customers of high-end printers continue to use Stratasys print materials, headline risk from new entrants and the negative impact to materials revenue growth from slow printer growth cannot be ignored. Management is open to acquisitions, but more than one acquisition might be needed to build out meaningful metals capacity, Mohan commented.

Focus On R&D

The company is focusing on R&D and aims at developing new printer technology and new materials and have printers with capabilities that are comparable to the expected offerings from HP Inc HPQ.

“Management considers its multi-material/multi- color capability and established sales channel to be an advantage over HPQ,” the analyst wrote. He believes that the industry’s significant expansion over the last two years and the consequent buildup of excess capacity would limit long-term growth rates.