Industry Overview - 3D Printing, also known as additive manufacturing, has transformed from a sci-fi concept to a practical technology since its inception in the 1980s, allowing for the creation of three-dimensional objects from digital designs [1] - The technology offers advantages over traditional manufacturing, including cost-effectiveness, customization, precision, and sustainability [1] Market Adoption - Businesses are increasingly adopting 3D Printing for rapid prototyping and on-demand production, significantly reducing lead times and costs [2] - Major companies in the 3D Printing space include Xometry, Proto Labs Inc., and Stratasys, with tech giants like Microsoft and HP also entering the market [2] Advantages of 3D Printing - The use of lighter and more durable components, reduced material waste, and faster production cycles make 3D Printing a game-changer [3] - It enables localized production, cutting down supply chains and lowering transportation costs, which is particularly beneficial for industries with fluctuating demand [3] Industry Applications - 3D Printing is being adopted across various industries, including healthcare, aerospace, automotive, and consumer goods [4] - In aerospace, it is used for lightweight components, while in automotive, it aids in producing prototypes and customized parts [4] - The medical field is leveraging 3D Printing for personalized medical tools and prosthetics, with advancements in tissue and organ printing expected to revolutionize healthcare [4] Market Size and Growth - The global 3D Printing market was valued at $19.33 billion in 2024 and is projected to grow at a CAGR of 23.4% by 2032, with North America holding a 41.39% market share [5] Investment Opportunities - 3D Printing presents significant growth opportunities for investors, with companies like GE Aerospace, Carpenter Technology, and Proto Labs identified as high-potential stocks [6] Company Profiles - **GE Aerospace**: A leader in additive manufacturing, GE has made significant investments in 3D Printing, including a $54 million investment for additional machines and tooling in Alabama and $107 million for facilities in Cincinnati [10][11] - **Carpenter Technology**: Built its additive capabilities through acquisitions and opened an Emerging Technology Center in Alabama, focusing on producing specialty alloys for 3D Printing [12][13] - **Proto Labs**: Known for rapid prototyping, Proto Labs has over 250,000 parts printed monthly and generated approximately $84 million in revenues from its 3D Printing service in 2024 [17]

Group 1 - Stratasys' stock has rebounded significantly in recent months following the announcement of preliminary earnings for Q4 2024, despite the results being described as mediocre [1] - Revenue for Stratasys is stabilizing, and the company is now experiencing positive cash flows [1] Group 2 - Narweena, an asset manager led by Richard Durant, focuses on identifying market dislocations due to a poor understanding of long-term business prospects [2] - The firm aims to achieve excess risk-adjusted returns by targeting businesses with secular growth opportunities in markets with barriers to entry [2] - Narweena's investment strategy is driven by the belief that an aging population and low population growth will create new investment opportunities, contrasting with past trends [2] - The firm emphasizes that many industries may face stagnation or secular decline, which could paradoxically enhance business performance due to reduced competition [2] - There is a noted trend of economies being increasingly dominated by asset-light businesses, leading to a declining need for infrastructure investments [2] - A large pool of capital is pursuing a limited set of investment opportunities, resulting in rising asset prices and compressed risk premia over time [2]

Industry Overview - The 3D printing industry has been a disaster for shareholders, destroying billions in value [1] - Competition in the 3D printing industry is intense, with some businesses likely to go bankrupt [1] - Stratasys (NASDAQ: SSYS) remains a key player in the 3D printing market [1] Investment Focus - The investment focus is on growth companies with a bias towards the mid-cap segment [1] - Key sectors under study include biotechnologies, computer chips, cloud technology, energy, and commodities [1] - Special attention is given to risks surrounding business cases, with a top-down approach complementing bottom-up analysis [1] Analytical Approach - A systematic balance sheet analysis is performed to assess the financial health of growing businesses [1] - Stress tests are employed to challenge investment theses and evaluate the degree of safety in each model [1] - Long-term capital appreciation is preferred over short-term speculation [1] Analyst Background - The analyst holds a master's in communication and an MBA, with experience in journalism [1] - The analyst has been a contributor to Seeking Alpha since 2023, focusing on technology and geopolitically relevant companies [1]

Industry Overview - The Zacks Computer-Peripheral Equipment industry is facing challenges due to weakening IT spending caused by macroeconomic uncertainties, high inflation, and geopolitical risks [1] - Demand for remote working and online learning-related computer peripherals has declined in the post-pandemic era [1] - The industry comprises companies offering computer input, output, and storage devices, including keyboards, mice, LCD panels, smart glass, 3D printers, and transaction-based printer products [3] - The industry is highly competitive, with companies focusing on innovation to meet current demand trends and strengthen product portfolios [4] Key Trends Shaping the Industry - Shift in consumer preference from mobile gaming to professional gaming experiences, driven by advanced gaming devices and the popularity of e-sports leagues [5] - Growing demand for 3D printing solutions across industries like medical, aerospace, and automotive, driven by engineers, designers, and entrepreneurs [6] - Expansion into price-sensitive regions like Asia Pacific and the Middle East & Africa through low-cost quality products [7] - Delayed PC refresh cycle due to the pandemic-led work-from-home trend, negatively impacting demand for computer peripherals [9] - Elevated operating expenses from R&D and sales force expansion, likely to dent margins in the near term [10] Industry Performance and Valuation - The Zacks Computer-Peripheral Equipment industry has underperformed the S&P 500 and the broader Zacks Computer and Technology sector, plunging 30.4% in the trailing 12 months [14] - The industry is currently trading at a forward 12-month P/S of 0.68X, compared to the S&P 500's 5.46X and the Zacks Computer and Technology sector's 7.02X [15] - The industry carries a Zacks Industry Rank 157, placing it in the bottom 37% of over 250 Zacks industries, indicating dim near-term prospects [11][12] Companies to Watch Stratasys (SSYS) - Manufacturer of 3D printers and rapid prototyping systems for industries like automotive, aerospace, defense, and medical [16] - Benefiting from increased demand for 3D printed equipment, with cost-control initiatives and innovative product introductions driving growth [17][18] - Consensus earnings estimate for 2025 remains unchanged at 33 cents per share, with the stock depreciating 35.6% in the past year [19] Mercury Systems (MRCY) - Provider of sensor and safety-critical mission processing subsystems for aerospace, defense, and intelligence programs [20] - Benefiting from modernization in radar, electronic warfare, and C4I, with a revised upward earnings estimate of 31 cents per share for fiscal 2025 [21][22] - Stock has soared 36.2% in the past 12 months [22] Logitech (LOGI) - Global leader in PC peripherals and digital platforms, with products in PC navigation, gaming, and video security [22] - Experiencing recovery from the post-pandemic downturn, with three consecutive quarters of year-over-year sales growth [23] - Increasing hybrid work trends and partnerships with cloud providers like Zoom and Microsoft are key growth drivers [24] - Consensus earnings estimate for fiscal 2025 remains unchanged at $4.63 per share, with the stock declining 9.1% over the past year [25] TransAct Technologies (TACT) - Manufacturer of transaction-based printers and related products for vertical markets like gaming, financial services, and kiosks [26] - Benefiting from accelerated digital transformation and business automation, with trusted printers for transaction records [27] - Consensus earnings estimate for 2025 remains unchanged at a loss of 17 cents per share, with the stock plunging 41.7% over the past year [28]

Core Viewpoint - Stratasys (SSYS) has been upgraded to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system emphasizes the importance of changing earnings estimates in determining near-term stock price movements, making it a valuable tool for investors [2][4]. - An increase in earnings estimates typically leads to buying pressure and a potential rise in stock price, reflecting positive sentiment about the company's earnings outlook [3][5]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - The system maintains a balanced distribution of 'buy' and 'sell' ratings, ensuring that only the top 5% of stocks receive a 'Strong Buy' rating, indicating superior earnings estimate revisions [9][10]. Earnings Estimate Revisions for Stratasys - For the fiscal year ending December 2024, Stratasys is expected to earn $0.04 per share, reflecting a -63.6% change from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Stratasys has increased by 29.6%, indicating a positive trend in earnings estimates [8].

Company Performance and Financials - The Zacks Consensus Estimate for SSYS' 2025 earnings is 33 cents per share, remaining steady over the past 30 days [1] - The consensus mark for SSYS' 2025 revenues is $579.64 million, indicating a year-over-year growth of 1.73% [1] - SSYS shares have lost 34.9% over the past year, underperforming the Zacks Computer and Technology sector's appreciation of 30.4% and the Zacks Computer – Peripheral Equipment industry's decline of 31.5% [2] - SSYS shares have underperformed industry peers like Immersion (IMMR), Alps Electric (APELY), and Logitech International (LOGI) over the past year [2] Technological Innovations and Product Portfolio - The Stratasys Neo Build Processor, developed in collaboration with Materialise, accelerates high-quality investment casting production and boosts SSYS' top-line growth [1] - SSYS' F3300 industrial platform offers faster print speeds, superior thermoplastic accuracy, and reduced downtime, making it a standout for factory floor manufacturing across industries [5] - SSYS' Origin 2 printer and Origin Cure system cater to demands for injection-molding quality in short production runs [5] - In the dental sector, SSYS' TrueDent solution is highly regarded for its disruption in both cost and fit for dentures [5] Growth Prospects and Industry Focus - SSYS' growth prospects remain strong with its technological innovations and expanding portfolio, focusing on high-growth industries like automotive, defense, aerospace, medical devices, and dental applications [3] - Despite recent stock underperformance, SSYS' innovative technologies, expanding product portfolio, and strong growth prospects in high-demand industries position it for sustained growth [6] Earnings Performance - SSYS beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters, was in line once, and missed the other one, with an average surprise of 37.50% [4] Investment Opportunity - SSYS currently flaunts a Zacks Rank 1 (Strong Buy) and a Growth Score of B, offering a strong investment opportunity according to the Zacks proprietary methodology [6]

Core Viewpoint - Stratasys reported a mixed performance in its Q3 2024 earnings, with a slight earnings beat but a significant decline in revenues year-over-year, raising questions about future performance leading up to the next earnings release [1][2][3]. Financial Performance - Q3 2024 earnings were 1 cent per share, surpassing the Zacks Consensus Estimate of a loss of 2 cents per share, but down from non-GAAP earnings of 4 cents per share in the same quarter last year [2]. - Quarterly revenues fell 13.6% year-over-year to $140 million, missing the consensus mark by 3.08%, primarily due to macroeconomic factors affecting customer capital equipment spending [3]. - Product revenues decreased by 16.9% to $94.1 million, with System revenues plummeting 38.4% to $31.7 million, while Consumables revenues slightly increased by 1% to $62.4 million [4]. - Service revenues declined 6.1% to $45.9 million, although Customer Support revenues grew by 1.3% to $31 million [4]. - Non-GAAP gross profit fell 8.8% to $69.5 million, but the non-GAAP gross margin improved by 130 basis points to 49.6% [5]. Operating Expenses and Losses - Non-GAAP operating expenses decreased by 6.1% to $69.6 million, resulting in a non-GAAP operating loss of $0.1 million compared to a profit of $4.1 million in the previous year, with the margin contracting by 260 basis points to negative 0.1% [6]. - Adjusted EBITDA dropped 47.9% to $5.1 million [6]. Product Developments - The company experienced growth from new product launches, including Origin 2 and Stratasys Neo Build Processor, which expanded manufacturing applications and use cases [7]. - Strong demand was noted for offerings like F3300 and TrueDent, with the F3300 platform delivering high-quality thermoplastic parts [8]. Balance Sheet and Cash Flow - Stratasys ended Q3 with cash and short-term deposits of $143.95 million, down from $150.9 million in the previous quarter, and reported an operating cash outflow of $4.5 million, an increase from $2.4 million in the prior quarter [9]. 2024 Outlook - For 2024, management projects revenues between $570 million and $580 million, with non-GAAP earnings per share expected in the range of 3-7 cents [10]. - Gross margins are anticipated to be between 49% and 49.2%, and non-GAAP operating margins are expected to range from 0.6% to 1.3% [10]. - Operating expenses are estimated to be between $276 million and $278 million, with adjusted EBITDA projected at $25 million to $28 million [11]. Market Sentiment - The consensus estimate for Stratasys has shifted down by 33.33% recently, indicating a flatlining of estimates over the past month [14][15]. - Stratasys holds a Zacks Rank 2 (Buy), suggesting expectations for above-average returns in the coming months [17].

Company Performance - Stratasys Ltd (SSYS) saw its share prices climb after raising its earnings outlook for the year and unexpectedly turning an adjusted profit in the third quarter [1] - The company has become the official 3D Printing Partner of NASCAR, which will exclusively use Stratasys 3D printing technology for the design and production of parts and tools [1] Industry Impact - 3D printing impacts multiple industries, offering potential upside to Stratasys, including Aerospace, Automotive, Consumer Products, Dental, Medical, Education, Art and Fashion, Agriculture, Applications, Manufacturing, Investment Casting, Jigs and Fixtures, Production Parts, Rapid Prototyping, Packaging, Design, Composite Tooling, and Dentures [1] Market Performance - SSYS outperforms SPY [4] - Momentum is improving [5] - The price is above the 200-DMA and the July 6-month calendar range high, with the distance between the 50 and 200-DMAs narrowing [3]

Company Performance - Stratasys Ltd reported Q3 numbers showing decent improvement in efficiency, but top-line growth remains a concern [1] Analyst Perspective - The analyst focuses on long-term horizon investing with a 5-10 year outlook and prefers a portfolio mix of growth, value, and dividend-paying stocks, with a tendency to lean towards value investments [1] - The analyst occasionally engages in selling options as part of their investment strategy [1]

Earnings Performance - The company reported Q3 2024 earnings of 1 cent per share, beating the Zacks Consensus Estimate of a loss of 2 cents per share [1] - Non-GAAP earnings were 4 cents per share in the year-ago quarter [1] - The company has beaten the Zacks Consensus Estimate in three of the trailing four quarters with an average surprise of 37.5% [1] Revenue Performance - Quarterly revenues fell 13.6% year over year to $140 million, missing the consensus mark by 3.08% [2] - Product revenues declined 16.9% year over year to $94.1 million, with System revenues plunging 38.4% to $31.7 million and Consumables revenues increasing 1% to $62.4 million [3] - Services revenues declined 6.1% year over year to $45.9 million, with Customer Support revenues advancing 1.3% to $31 million [3] Profitability Metrics - Non-GAAP gross profit fell 8.8% year over year to $69.5 million, while the non-GAAP gross margin expanded 130 bps to 49.6% [4] - Non-GAAP operating expenses dropped 6.1% year over year to $69.6 million [4] - Non-GAAP operating loss was $0.1 million, compared to a profit of $4.1 million in the year-ago quarter, with the margin contracting 260 bps to negative 0.1% [4] - Adjusted EBITDA plunged 47.9% to $5.1 million [4] Product and Market Developments - The company saw significant growth driven by the launch of new products, including Origin 2, Stratasys Neo Build Processor for Investment Casting, and TechStyle Fabric Alignment Station, which expanded manufacturing applications and use cases [5] - Offerings like F3300 and TrueDent showed strong demand, with F3300 driving demand for the flagship F3300 industrial platform and delivering high-quality thermoplastic parts [6] Financial Position - The company exited Q3 with cash and short-term deposits of $143.95 million, down from $150.9 million at the end of the previous quarter [7] - Operating cash outflow increased significantly to $4.5 million, compared to $2.4 million in the previous quarter [7] 2024 Outlook - Management expects 2024 revenues to be between $570 million and $580 million, with non-GAAP earnings per share forecasted in the range of 3-7 cents [8] - Gross margins are anticipated to be between 49% and 49.2%, and the non-GAAP operating margin is expected to be in the range of 0.6-1.3% [8] - Operating expenses are estimated to be between $276 million and $278 million, with adjusted EBITDA anticipated in the range of $25-$28 million [9] - The company's 2024 forecast for revenues and operating expenses remains unchanged [10] Stock Performance and Sector Comparison - The company's shares have lost 29.3% year to date, underperforming the Zacks Computer & Technology sector's growth of 30% [2] - In comparison, Arista Networks (ANET) has gained 68.1% year to date, Accenture (ACN) has gained 5.5%, and Adobe (ADBE) has declined 10.7% [12]