3D Systems Has Path To Sustainable Growth, Piper Jaffray Says In Upgrade

After nearly two years of alternating between Neutral and Underweight ratings, Piper Jaffray is now bullish on 3D Systems Corporation DDD and said Tuesday that the company has a path toward sustainable growth.

The Analyst

Analyst Troy Jensen upgraded 3D Systems from Neutral to Overweight and set a $17 price target.

The Thesis

Piper Jaffray's proprietary survey of 3D Systems resellers point to a "challenging fourth quarter," but this could be a function of the 3-D printer manufacturer's decision to push into direct sales, Jensen said in the Tuesday upgrade note.

The research firm's proprietary survey with resellers found negative feedback in each quarter of 2018, but the company itself showed a year-over-year system growth rate of 21 percent in Q1, 30 percent in Q2 and 24 percent in Q3.

Conversations with resellers are therefore no longer considered a datapoint that correlates well with the company's actual results, Jensen said. 

The broader 3-D industry is undergoing a period of higher demand, part of which is due to the much anticipated production market — as opposed to prototyping — starting to gain momentum, the analyst said.

3D Systems is well-positioned to take advantage of industry trends and show sustainable growth in 2019 and beyond from new products, including the Figure 4 platform and the metal 3D Printer DMP Flex 350, according to Piper Jaffray. 

The stock is trading at just 1.7 times EV/sales with a high short interest, which could help drive upside, according to the sell-side firm. The $17 price target is based on 2.5 times 2019 estimated EV/sales.

Price Action

3D Systems shares were trading up 7.41 percent at $12.40 at the time of publication Tuesday.

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