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Stratasys' Twin Buys to Strengthen AM Biz - Analyst Blog

Posted
4/3/2014 5:15:00 PM
By: Zacks.com
Referenced Stocks:AM;DDD;JNPR;RMBS;SSYS

In order to strengthen its additive manufacturing (AM) business, Stratasys Ltd. ( SSYS ), a 3D printing company, inked a deal to acquire two privately-held companies, Solid Concepts and  Harvest Technologies. Stratasys said it would buy Solid Concepts for a total purchase consideration of $295 million although the financial clauses of the Harvest Technologies deal were not disclosed. The acquisition is anticipated to be accretive to Stratasys' non-GAAP earnings per share in the very first 12 months after closing.

Solid Concepts, founded in 1991, offers an array of AM solutions, which are used by companies in the automotive, aerospace, electronics, consumer goods, and other sectors to improve product designs. On the other hand, Belton-based Harvest Technologies provides manufacturing process knowhow and focuses more on end-use parts for several enterprises. These acquisitions will help Stratasys to evolve as a leader in 3D industrial printing and manufacturing and position it for growth in the 3D printing space.

The acquisitions are also expected to expand and enhance Stratasys AM or 3D Printing Platform, leveraging the acquirees' AM solutions. Moreover, post-acquisition, Stratasys will combine Solid Concepts and Harvest Technologies with RedEye to form a single additive manufacturing services business unit.

RedEye is an online extension of Stratasys' BuildFDM service. It provides fast and easy prototyping and direct digital manufacturing that ensures good business for the company.

Moreover, this partnership will enable Stratasys to attract new clients, thereby increasing the installed base of 3D printing and additive manufacturing systems.  The combined portfolio will strengthen the company's market position and enable it to leverage significant cross-selling opportunities.

Stratasys has resorted to strategic acquisitions to diversify its offerings and expand its operating markets. The strong cash balance of $414.1 billion in the fourth quarter of 2014 enabled the company to go for strategic acquisitions.

We believe that Stratasys' product launches and global expansion will help it to generate incremental sales in the long run by increasing its installed base. This will help Stratasys to generate higher recurring revenues, going forward.

However, Stratasys is concerned about its high-cost business model and competition from big and small players including 3D Systems Corp. ( DDD ).

Currently, Stratasys carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the sector are Juniper Networks, Inc. ( JNPR ) and Rambus Inc. ( RMBS ), both carrying a Zacks Rank #1 (Strong Buy).



3D SYSTEMS CORP (DDD): Free Stock Analysis Report

JUNIPER NETWRKS (JNPR): Free Stock Analysis Report

RAMBUS INC (RMBS): Free Stock Analysis Report

STRATASYS LTD (SSYS): Free Stock Analysis Report

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