A weekend column titled "Beware 3-D Printing!" questions industry valuations, and suggests 3D Systems (DDD -4.2% premarket) could drop 80%.
The column highlights Whitney Tilson's critique of 3D Systems and the company's recent warning, argues 3D printing/additive manufacturing "remains slow and cumbersome," and notes the presence of rivals such as printing services firm Shapeways and leading metal printer maker EOS.
Barron's suggests software vendors Autodesk (ADSK) and Dassault (DASTY) are a better way to play the trend (ed: 3D printing use cases account for only a fraction of each company's sales), and notes the former's efforts to automate design work by leveraging real-life info. "The goal is for a designer to input a function, letting the computer dictate the most efficient design."
ExOne (XONE +2.1%) has bought MWT, a German maker of industrial microwaves, and the assets of Machin-A-Mation, a Michigan-based machining shop. Between them, the acquisitions cost $9.8M.
The 3D printer maker says MWT's microwaves will be used to strengthen its sand printing offerings, and that Machina-A-Mation, located near an ExOne production service center focused on aerospace/shipbuilding clients, will help it "address the finishing requirements for complex parts which are cast from [ExOne's] 3D printed sand molds."
MWT's microwave ops will be folded into ExOne's Augsburg, Germany manufacturing ops.
3D Systems' (DDD) Q4 results were in-line with the guidance provided in the company's Feb. 5 warning. Likewise, the 2014 guidance provided at the time - revenue of $680M-$720M and EPS of $0.73-$0.85 - has been reiterated.
Q4 gross margin was 51.7%, flat Y/Y but down 90 bps Q/Q. SG&A spend soared 42% Q/Q and 72% Y/Y to $45.6M, R&D jumped 54% Q/Q and 113% Y/Y to $16.6M (10.7% of revenue).
Product revenue (inc. 3D printers) +76% Y/Y, an even growth rate with Q3. Print materials growth rose to +39% from 30%, services growth slipped to 33% from 38%. Products made up 48% of revenue.
Consumer solutions +162% Y/Y, but still only 6% of revenue. Healthcare +67% and 14% of revenue.
Peers are also up moderately: SSYS +1.9%. XONE +1.6%. VJET +2.2%.
William Blair's Jason Drab, bearish for a long time on 3D Systems (DDD +1.2%) and Stratasys (SSYS +2.9%), has upgraded the latter to Market Perform. The call is leading 3D printing names to trade higher out of the gate. XONE +2.1%. VJET +1.9%.
Drab cites Stratasys' core business strength, success at integrating Objet, new product launches and partnerships, and potential MakerBot revenue upside. He notes management's outlook implies MakerBot will have 2014 revenue of $120M, up from an estimated $80M in 2013, and that the business has recently struck a series of big reseller deals.
At the same time, Drab admits Stratasys' valuation (54x 2014E EPS) is well above that of tech companies he considers to have similar "growth, margin, and return profiles."
Today's gains come nine days after 3D printing stocks plunged in response to 3D Systems' warning.
Citing gross margin pressure stemming from an unfavorable mix, along with heavy spending, 3D Systems (DDD -27.4%) now expects to report 2013 EPS of $0.83-$0.87, below prior guidance of $0.93-$1.03 and a $0.96 consensus. Revenue is expected to be in a range of $513M-$514M, in-line with guidance of $500M-$530M but slightly below a $514.2M consensus.
3D's full-year guidance implies Q4 EPS of just $0.16-$0.20, far below a $0.30 consensus.
The company also now expects 2014 revenue of $680M-$720M and EPS of $0.73-$0.85. While the former is above a $671.3M consensus, the latter is below a $1.27 consensus.
Whereas 3D's gross margin rose 80 bps Y/Y in Q3, it's expected to be down slightly in Q4.
With the company carrying steep multiples going into today, 3D Systems investors aren't taking the news well. Neither are investors in peers Stratasys (SSYS -12.3%), ExOne (XONE -13.7%), and Voxeljet (VJET -10.1%).
Other companies occasionally hyped as 3D printing plays are also off sharply: PRLB -6.2%. PRCP -10.7%. CIMT -6.3%.
In a new report, Citron Research assigns a $56 near-term PT to 3D Systems (DDD -6.5%), and takes aim at the company's valuation (naturally), growth prospects, and competitive positioning.
Citron doesn't believe any of the companies 3D has acquired "control transformative technologies" amid a fragmented IP environment for 3D printing, and deems its Cube consumer/enthusiast 3D printer line to be second-rate.
As evidence, it notes a Cube printer has an average rating of just 2.6/5 on Amazon from 10 reviewers, while MakerBot's (SSYS -4.7%) competing Replicator 2 has a rating of 3.8/5 from 48 reviewers.
Citron also notes recently-acquired Phenix Systems (represents 3D's entry into the metal printing market) has had less than $10M in revenue each of the last four years, and makes note of pending competition from Mitsubishi, H-P, and Epson. Likewise, The Sugar Lab (acquired in September) is deemed to be "nothing more than a husband and wife team working out an apartment in East Los Angeles."
Like Credit Suisse, Citron notes 3D trades at a major premium to Stratasys, which it considers a relatively better investment, and thinks shares would only be worth $46 even if 3D generated $2B in 2021 sales with a 20% profit margin, and paid no taxes.
Stratasys has followed 3D lower, as have Voxeljet (VJET -5.8%) and ExOne (XONE -6.8%).
ExOne (XONE) now expects 2013 revenue of $40M-$42M, below prior guidance of $48M and a $48M consensus. The revised guidance implies Q4 revenue of $11.2M-$13.2M, well below a $19.6M consensus. (PR)
The 3D printer maker mostly blames "machine sales not yet completed for customers in Russia, India, Mexico and France, some of which involve approval processes that were deferred into 2014." Four high-end S-Max 3D printer sales are said to be unfinished, along with one S-Print printer sale.
The company adds its sold its inventory of six M-Flex machines in 2013 (sales started in Q3), and that it will explore acquisition and partnership opportunities in 2014. M-Flex sales are expected to triple this year.
The warning comes on a day when Stratasys provided strong 2014 revenue guidance to go with soft EPS guidance.
XONE remains halted, and will resume trading at 4:35. Peers are selling off: DDD -3.6%. SSYS -2.6%. VJET -7.4%.
3D Systems (DDD -1.2% premarket), ExOne (XONE -2.5%), and Voxeljet (VJET -1.7%) are lower after Stratasys (SSYS -4.4%) offered above-consensus 2014 revenue guidance, but below-consensus EPS guidance.
Stratasys cites major sales/marketing and R&D investments for its EPS guidance. Both Stratasys and 3D Systems have been ramping their R&D spend (I, II) after years of keeping it at a miniscule percentage of revenue (a policy that hadn't gone unnoticed among critics).
Stratasys expects its op. margin to be flat Y/Y in 2014, with margin growth in its core business to be offset by a larger contribution from MakerBot, which has a lower op. margin. Capex is expected to be in a range of $50M-$70M (compared with revenue of $660M-$680M).
RBC has started coverage on 3D Systems and Stratasys with Outperform ratings, and predicts the 3D printing industry will post a 24% CAGR from 2013-2021.
The firm likes 3D Systems' end-to-end product line, M&A activity, and margin expansion potential, and it's a fan of Stratasys' 3D-printed parts business (RedEye) and dominant additive manufacturing position, as well as MakerBot.
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ExOne Co is a global provider of 3D printing machines & printed products to industrial customers. The Company's business consists of manufacturing & selling 3D printing machines & printing products to customers using its in-house 3D printing machines.