3D Systems Corporation DDD investors have reason to be concerned exiting the 3-D printer manufacturer's third-quarter earnings report, according to Bank of America Merrill Lynch.
The Analyst
Analyst Wamsi Mohan maintains an Underperform rating on 3D Systems with a price target lowered from $11 to $10.
The Thesis
3D Systems' revenue and earnings in Q3 fell short of expectations due to lower-than-expected printer and material revenues, although operating margins did move higher, Mohan said in a Tuesday note. (See the analyst's track record here.)
Investors should turn incrementally bearish on the stock after commentary in the post-earnings conference call pointed to ongoing pressures in the metal unit for four to five months, the analyst said. Investments in go-to-market should continue, he said.
The company's strategy to focus more on hardware sales to improve its installed base should pressure margins through 2019, Mohan said.
On the other hand, new product launches are seeing some signs of success, including the ProX DMP 350, as demand is exceeding supply capacity — creating a tailwind for fiscal 2019, the analyst said.
Nevertheless, expectations for lower-than-expected revenue growth warrants a bearish stance on the stock, according to BofA.
The sell-side firm's revised $10 price target is based on 1.5 times calendar year 2018 EV/sales, which was lowered from $697 million to $681 million.
Price Action
3D Systems shares were down 21.48 percent at $13.34 at the time of publication Wednesday.
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