As the 3D printing industry experiences massive growth, the stocks behind the companies which are growing seem to be plummeting. This is because there has been a disconnect between the actual market for 3D printers and that for 3D printing stocks. In late 2013 to early 2014, we experienced a bit of irrational exuberance within the stock market for stocks related to additive manufacturing. We saw gains within the sector which would make even some of the world’s top investors envious.
With that said, since early 2014, the majority of major 3D printing stocks have dropped, many substantially, and some to levels under those which they were trading at prior to the 2013 run-up.
There are few things which can hurt a stock as much as a dismal earnings report. One such thing is an earnings warning prior to a scheduled report. Last night, after already seeing such a warning from competitor 3D Systems late last year, Stratasys (NASDAQ: SSYS) has also warned the market that expectations are too high.
The company now expects 2014 revenue to fall somewhere between $748-$750 million, which represents organic growth of 31% year over year. This would also equate to an EPS of $1.97-$2.03. This compares to prior guidance of $750-$770 million and an EPS of $2.21-$2.31.
To make matters worse, Stratasys has also provided 2015 guidance which falls short of what most analysts had expected. They predict revenue of $950-$960 million and an EPS of $2.07-$2.24 per share for this year. The consensus among Wall Street analysts was for revenue of approximately $1.01 billion and an EPS of $2.91.
“As a result of its new investment plan, Stratasys expects incremental annual operating expenditures of 2% of anticipated revenues for [the] coming two to three years, with total operating expenses in 2015 to be in the range of 46% to 47% of anticipated revenues,” stated the company is a special release. “Additionally, the company expects to incur capital expenditures in the range of $160 to $200 million in 2015. The Company also expects an effective tax rate of 5% to 10%.”
Interestingly enough, the MakerBot division of the company seemed to have underperformed expectations, despite huge gains last quarter. MakerBot saw a 7% year over year increase in revenue in Q4, which represented 12% of Stratasys’ total revenue. Clearly this is not what investors had expected, with the stock trading down over 25% in early hours trading prior to the market’s open. Despite all this, the company has remained steadfast with their growth plans, with a long-term operating model which includes the following key elements:
- Investment plan which supports $3 billion in revenue in 2020
- Annual organic revenue growth of 25% or more
- Non-GAAP operating income as a percentage of sales of 18% to 23%
- Non-GAAP net income as a percentage of sales of 16% to 21%
For long term investors, this may be seen as a buying opportunity, while short term investors may be running for the hills. It will be interesting to see what other companies within the industry report later this quarter, and just how much of an effect this warning will have on competing companies within the industry.
Are you a Stratasys investor? What are your thoughts on this warning? Let us know in the Stratasys Warns Investors forum thread on 3DPB.com