Stratasys' third-quarter results were encouraging as the company
reported better-than-expected sales on the back of solid
performances from its Product and Services segments. Moreover,
upward revision of the revenue outlook is a positive sign. Although
the company's current phase of investments is expected to impact
margins in the short run, product launches and global expansion
will help Stratasys in the long run to generate incremental sales.
Moreover, the acquisition of MakerBot is expected to aid its 3D
systems business growth and increase its installed base. Thus, we
upgrade our recommendation on Stratasys from Neutral to Outperform
and set a target price of $156.00.
Headquartered in Eden Prairie, Minn., Stratasys, Ltd. (SSYS) is
a leading manufacturer of in-office rapid prototyping (RP) and
manufacturing systems and 3D printers for automotive, aerospace,
defense, electronic, medical, education and consumer product
original equipment manufacturers (OEMs). The company's systems are
also used in direct digital manufacturing (DDM) and rapid tooling
applications. With the use of patented Fused Deposition Modeling
(FDM) and PolyJet rapid prototyping processes, engineers and
designers are able to create precise physical models, tools and
three-dimensional (3D) prototypes out of plastic and other
materials using workstation-based computer-aided design (CAD).
These prototypes are used for testing form, fit and function
throughout the design and development process. Essentially,
Stratasys' systems allow design engineers to develop highly complex
geometrical designs using a wide range of high-performance
engineering materials with in-office RP systems that require no
chemical post processing, special venting or facility
The company generally reports revenues under two segments.
First, Product Revenues, which includes revenues generated through
the sale of products. Second, Services Revenues, which include
revenues generated from service offerings, such as RedEye paid
parts, maintenance and other services. In fiscal 2012, Products and
Services accounted for 84.0% and 16.0% of the total revenue,
The company competes in a marketplace that is still dominated by
conventional methods of model-making and prototype development.
Machinists and engineers working on blueprints or CAD files and
using machining or manual methods generally perform prototype
development and fabrication.
The company's competitors deploy various technologies in their
RP devices. 3D Systems and CMET use stereo lithography (SLA) in
their products, while 3D Systems and EOS GmbH manufacture machines
that use selective laser sintering (SLS) to solidify powdered
material. Z Corp deploys inkjet technology to unite powdered
materials, such as starch, while on the other hand, Solidscape, 3D
Systems and Objet Geometries have developed prototyping systems
that use inkjet technology to deposit resin material in layers. A
smoothing or milling process is essential between each deposited
layer to maintain accuracy in these processes that ultimately
increases material yields. Envisiontec utilizes a photopolymer mask
and a light process to develop models and Solido employs a plastic
sheet lamination technique.
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