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Buy Alert: Stratasys Has Multiple Positive Catalysts

Larry Ramer

3D printer maker Stratasys (NASDAQ:SSYS) reported strong second-quarter results, and there are multiple indications that usage of the company’s products is increasing. Meanwhile, Wall Street appears to be enthusiastic about the results, as two research firms were bullish on the company following the news, and SSYS stock reached levels not seen since March.

Stratasys’ Q2 earnings per share came in at 15 cents, versus the consensus estimate of six cents per share. It reported revenue of $170.24 million, beating the consensus outlook by $3.2 million. Moreover, it reiterated its fiscal 2018 revenue guidance of $670 million-$700 million, versus the consensus estimate of $669 million.

Increased Utilization Will Eventually Boost SSYS Stock

More importantly, the company made multiple statements indicating that customers are using its products much more frequently. Specifically, Stratasys noted that its revenue from consumables, which refers to materials that are used and depleted in conjunction with 3D printers, rose 4.8% year over year last quarter. Stratasys stated that the increase “reflects strong utilization of (its) installed base of systems.” Meanwhile, the company’s customer support revenue surged nearly 10% YoY, also likely reflecting increased usage of its products.

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Stratasys’ revenue from sales of its 3D printers, which it calls “systems revenue,” slumped 8.2% versus the same period a year earlier. But the apparent increase in utilization of the company’s products will eventually lead to increased systems revenue, as the company’s customers have to buy new printers to replace those that have been worn out.

Indeed, the company reported that the sales of its higher-end printers to North American customers have already begun to recover. Going forward, increases in high margin consumable and maintenance revenue, along with eventual jumps in the company’s systems revenue, will meaningfully boost Stratasys’ results and SSYS stock.

Strength In Key Markets Will Boost SSYS Stock

Meanwhile, Stratsys reported that its North American customers in the fields of government, aerospace and automotive were becoming more “committed” to utilizing its 3D printing products.

Along with many others, I have believed for many years that 3D printing would be most widely adopted by the manufacturers of industrial products that are made of many complex parts, all of which have to be precisely made. Common sense dictates that machines will be able to make such parts much more cheaply and reliably than human workers. Automobiles and planes definitely have many complex parts that need to be made precisely. Weapons systems and vehicles made by militaries are also in that category.

Consequently, the fact that aerospace and automobile companies, along with governments, are increasing their adoption of Stratasys’ 3D printing products is in-line with expectations — and it’s a trend that should continue going forward. Moreover, all three vertical markets are doing pretty well and should have significant amounts of money to spend on Stratasys’ products.

The Street Is Upbeat on SSYS Stock

Importantly, Wall Street appears to be quite upbeat on SSYS stock in the wake of the company’s results.   On Thursday, the shares reached $21.80,  their highest level since March. Meanwhile, Loop Capital raised its price target on SSYS stock to $21 from $18, as it believes that the company ‘s deal making rebounded “nicely” from Q1, The Fly reported.

Moreover, the firm is bullish about the company’s overall outlook, although it kept a “hold” rating on the shares. Also upbeat was Susquehanna, which identified Stratasys as a potential takeover target and kept a $25 price target and a “positive” rating on SSYS stock, The Fly noted.

Stratasys is clearly gaining traction in the market, and Wall Street is becoming more upbeat about SSYS stock. The company is looking for a new CEO, and there is a good chance that its new leader can improve its sales and marketing teams, enabling it to enter new vertical and geographical markets.

Given all of these positive catalysts, investors should definitely buy SSYS stock at current levels.

As of this writing, Larry Ramer owned shares of SSYS stock. 

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