3D Systems Downgraded At Needham: Investors Expecting Too Much

3D Systems Corporation DDD shares have spiked 110 percent year-to-date. Needham’s James Ricchiuti downgraded the rating for the company from Buy to Hold, after the shares outperformed the Nasdaq and rose past the previous price target.

The shares reflect expectations of healthy upside to estimates, analyst James Ricchiuti said. He added, however, that although there is upside to the EPS estimates, increases over the next year “are likely to be modest,” with 3D Systems having to limit operating costs while also having to “maintain and possibly step up investments in key areas, including 3D metals printing and expanded vertical market focus.”

Business Still Challenging

Eight publicly-traded 3D printing companies have reported robust sequential growth in 4Q. Ricchiuti said, however, that business continues to be tough, “compounded by the normal seasonal weakness experienced in the March quarter.”

Demand was healthy in the market’s metals additive manufacturing segment, but 3D Systems currently has only modest revenues from this. Meanwhile, y/y growth in 3D plastics printing is expected to have remained difficult. The analyst added that the company faces an additional, albeit modest, headwind from the legacy consumer 3D printer business, which it exited in 4Q.

New CEO

The company recently named Vyomesh Joshi as CEO. “We believe the new CEO will be focused initially on stabilizing the business and ensuring product quality and next on taking share and growing the business,” Ricchiuti wrote.