Stifel's 6 Takeaways From 3D Systems' Better-Than-Expected Q4

3D Systems Corporation DDD reported fourth-quarter results Wednesday that exceeded Wall Street's expectations but fell short of convincing Stifel to turn bullish.

The Analyst

Stifel's Patrick Newton maintains a Hold rating on 3D Systems' stock with a price target lifted from $11 to $12.

The Thesis

3D Systems' earnings report showed that its revenue growth trends remain "promising" and management's strategy of shifting to production printers is "intriguing," as it has the potential to spur revenue growth, Newton said in a note. A bullish stance on the stock isn't justified yet for six reasons, the analyst said: 

  • 3D Systems didn't offer any explicit revenue guidance for 2018, but did guide toward double-digit growth in various sectors like medical and materials. The company may need to offer guidance that can quantify the actual growth potential, Newton said. 
  • Operating expenditure and gross margin rates were flat in the fourth quarter of 2017 and are likely to stay flat throughout 2018.
  • Q4 gross margin percentage was in-line with expectations but fell 170 basis points year-over-year.
  • Operating expenditure was higher-than-expected in Q4 due to IT investments, increased hiring in sales and shifts in the go-to-market strategy.
  • Revenue was flat despite 15-percent year-over-year growth in units, and the company saw foreign exchange benefits.
  • Concerning industry trends in the 3-D printing market over the past few years implies that Stifel's 5.7-percent revenue growth target is in theory obtainable, but a conservative stance on the stock needs to stay in place, Newton said. 

Price Action

Shares of 3D Systems were trading higher by nearly 1 percent early Friday morning after gaining 5.8 percent on Thursday.

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Posted In: 3D printers3D PrintingPatrick NewtonStifelAnalyst ColorPrice TargetReiterationAnalyst Ratings