3D Systems Update BUY

DDD : NYSE : US$46.37
Target: US$75.00

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.

Investment recommendation
Takeaways from our meeting with LayerWise are positive for DDD’s
healthcare opportunity. LayerWise brings its own metal laser sintering
machine, engagements with the top-five orthopedic implant manufacturers,
and deep expertise across a broad range of materials. We reiterate a BUY
rating and $75 price target, noting that near-term we expect DDD to move
higher on solid Q3 performance, where we anticipate a strong recovery for
organic revenue growth (up 25%+ Y/Y) and rebounding gross margins.

LayerWise will expand DDD’s metal AM machine offering


Where Phenix machines differentiate on finer
metal powders, LayerWise machines have process controls optimized for
part production. In addition, LayerWise printers use a diverse range of
materials including Ti64, cobalt chrome, stainless and tool steels and

Contract manufacturer to top-five orthopedic implant OEMs
We believe LayerWise is at most one year into production orders with tier one orthopedic implant OEMs. It follows that revenues, while small within
the scale of total DDD revenues, are poised for a meaningful ramp. We
believe that growth from LayerWise implants could contribute to DDD’s
overall healthcare revenue (18% of total revenue in Q2) in a noticeable way
over time, given the orthopedic implant industry is still in the early stages of
moving to AM for the production of implants and LayerWise is a key
contract manufacturer. Competitors include DiSanto (Arcam) and C&A Tool
in the US, and Eurocoating, FIT, Poly-Shape and 3T RPD in Europe


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