BoA's Big 3D Systems Call: Double Upgrade To Buy After CEO Unveil

Following significantly underperforming the broader S&P Technology Index over the past couple of year, shares of 3D Systems Corporation DDD seem to have upside. BofA Merrill Lynch’s Wamsi Mohan upgraded the rating for the company from Underperform to Buy, while raising the price objective from $11 to $26.

Hopes From New CEO

Analyst Wamsi Mohan commented that 3D Systems’ new CEO Vyomesh Joshi “has the experience to drive turnaround.” Mohan believes that the following factors would lend upside to the company’s shares:

1. New direction and strategy by Vyomesh Joshi
2. Increasing profitability, driven by alignment of the cost structure with revenue growth
3. Portfolio optimization aimed at aligning the company for growth

“We can see a path to earnings upside, even in the context of weak secular demand for 3D printers,” the BofA Merrill Lynch report stated. Mohan believes that the new CEO has experience to achieve a meaningful improvement in operational efficiencies, to refocus investments and to drive portfolio optimization.

Estimate Changes

The EPS estimates for 2016, 2017 and 2018 have been raised from $0.28 to $0.30, from $0.39 to $0.57 and from $0.43 to $0.71, respectively, to reflect higher cost cuts to combat relatively soft demand. “We are not baking in a significant revenue recovery that has the ability to drive incremental upside,” Mohan wrote. He added that revenues from Metals could offset the impact of Consumer’s exit in 2016.