3D Systems Target Price $ 75

DDD : NYSE : US$45.26
BUY 
Target: US$75.00

COMPANY DESCRIPTION:
3D Systems is a leading provider of rapid 3D printing,
prototyping and manufacturing solutions used to create
product concept models, precision and functional
prototypes, master patterns for tooling, and end-use
production parts for direct manufacturing. 3D Systems’
products allow complex three-dimensional objects to be
manufactured directly from computer-aided design and
manufacturing (CAD/CAM) software tools.

FUNDAMENTALS REMAIN STRONG WITH UPSIDE POTENTIAL
Investment recommendation
We reiterate a BUY rating on strong top line growth and a looming
recovery for margins and earnings growth. While DDD has been under
pressure along with the rest of the 3D printing space, we believe positive
new product ramps, margin expansion, and earnings upside could act as
positive catalysts in the ensuing quarters. Our price target is reduced to
reflect multiple compression likely to afflict growth stocks in 2014,
although we continue to expect strong share appreciation from these
levels.
Investment highlights
 DDD reported Q1/14A (Mar) earnings this morning. Revenues and
EPS were $147.8 million and $0.15 compared to consensus
estimates of $145.5 million and $0.15. Revenue increased 45% Y/Y
(-5% Q/Q) driven by 28% Y/Y organic growth and included 53% Y/Y
growth in Printers and Other products, 41% Y/Y growth in Print
Materials and 38% Y/Y growth in Services.
 Management reiterated their 2014 targets, with a revenue
expectation of $680M to $720M (+36% Y/Y at $700M mid-point)
compared to our prior $710M and the $701M consensus
expectation. Guidance includes $80 million to $120 million in
Consumer revenues and $25 million to $50 million in Phenix metal
printer sales. Non-GAAP EPS is guided to $0.73-$0.85 compared to
our prior expectation of $0.83 and consensus expectation of $0.81.
Valuation
DDD’s price target of $75 (was $100) is 8x our 2015 sales estimate of
$950.5 million.

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