Morgan Stanley: Stratasys 'Challenges Continue'

In a report published Wednesday, Morgan Stanley analysts maintained an Equal-weight rating on Stratasys Ltd SSYS. Stratasys announced its preliminary 1Q revenues and EPS short of Morgan Stanley estimates. The company attributed the shortfall to capital spending constraints, currency, new production introductions and a slower channel ramp in Asia. "However, in our opinion the most concerning reason is the consolidation within the channel. The 3D printing industry is believed to be in the early stages of adoption which is inconsistent with go-to-market consolidation trends," the analysts said. The company has reduced its full year outlook by 13 percent at the midpoint from the guidance it had announced in early February. "Weaker MakerBot revenue and inability to make up the 1Q shortfall are the main reasons for the reduced outlook," the report mentioned. The analysts expect the company to continue making "strategic investments around vertical solutions, product development and go-to-market initiatives." These initiatives are, however, likely to continue exerting pressure on the company's margins. Lack of visibility into the future, uncertain market adoption rate and long term investment cycle remain key investment concerns.