Despite Woes, Oppenheimer Still Loves Stratasys Stock

• Stratasys, Ltd. SSYS shares have been trending lower in 2015 and are down 69 percent year-to-date.
• Oppenheimer’s Holden Lewis maintained an Outperform rating on the company, while reducing the price target from $50 to $42.
• Multiple expansion is possible if the company takes steps to make 2015 a trough year, Lewis stated.

Stratays preannounced disappointing 3Q results. “The pre-announcement did not unearth a lot new, although the lack of any seasonal uptick in sales was unexpected,” analyst Holden Lewis mentioned.

The non-GAAP EPS estimate for 3Q15 has been reduced from $0.10 to ($0.01). The non-GAAP EPS estimates for 2016 and 2017 have been reduced from $0.95 to $0.70 and from $1.80 to $1.20, respectively.

Lewis believes that Stratays can still attain over 10 percent sales growth in 2016 with the help of “stable forex and flat MakerBot.”

The company needs to show more aggression on the cost front, as this will allow it to “cement 2015 as the trough, potentially drive better leverage than we currently assume and allow a bit of multiple expansion,” the analyst wrote.

Lewis mentioned that the company is deep in "prove-it" mode, as are all other players in the 3D segment, but has a relatively less risky fundamental position.

The Oppenheimer report noted that issues at Stratays’ commercial unit appear to be mostly macro. MakerBot is being de-risked and is thus unlikely to be a problem in 2016.