On Thursday, CFRA maintained a Buy rating on Stratasys Inc. (NASDAQ:SSYS) but lowered the 12-month stock price target to $12 from the previous $15. The adjustment comes after considering the company's first-quarter performance and future revenue projections.
Stratasys reported a loss per share (LPS) of -$0.02 compared to last year's $0.02, beating the consensus by $0.05. Despite this, the company's revenue saw a 4% decline due to a challenging capital expenditure (capex) environment, with product revenue decreasing by 1.8% and services by 7.3%.
The decrease in Stratasys' revenue was attributed to an 18.7% drop in systems sales, a result of constrained customer budgets. However, this was partially offset by a 9.6% increase in higher-margin consumables, thanks to robust utilization rates. CFRA has revised its 2024 earnings per share (EPS) estimate for Stratasys to $0.16 from $0.25, while maintaining the 2025 EPS estimate at $0.35.
Despite the near-term headwinds with the capex downcycle expected to extend into the second half of 2024, Stratasys has secured significant customers such as Toyota (NYSE:TM), BAE Systems (LON:BAES), and Lockheed for its F3300 pipeline. This suggests a strong outlook for the company's future. Moreover, Stratasys has experienced a gross margin expansion of 130 basis points, reaching 48.6%, propelled by a greater mix of consumables sales and portfolio optimization.
Looking forward, Stratasys is anticipated to continue its strategic shift towards higher-margin materials and software, which is expected to create sustained profitability tailwinds. This strategic pivot could see gross margins rise towards the 49%-49.7% range as the company builds operating leverage.
InvestingPro Insights
Amidst the current financial landscape, Stratasys Inc. (NASDAQ:SSYS) presents an intriguing mix of strengths and challenges. A notable InvestingPro Tip highlights that Stratasys holds more cash than debt on its balance sheet, providing a degree of financial stability in uncertain times. Despite recent downward revisions by analysts for the upcoming period, there is an expectation for net income growth this year, indicating potential for recovery and growth.
InvestingPro Data underscores the complexity of Stratasys' situation with a market capitalization of $637.52 million and a negative P/E ratio, reflecting investor concerns over profitability. However, the company's price/book ratio, recorded at 0.72 for the last twelve months as of Q4 2023, suggests that the stock may be undervalued relative to its assets. Moreover, Stratasys is trading near its 52-week low, which could signify a buying opportunity for long-term investors who believe in the company's strategic shift towards higher-margin materials and software.
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