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SHARES

Stratasys’ (SSYS) share price is now worth one-tenth what it was 18 months ago, delivering its market capitalisation to only over $800M. Times have changed for the world’s major 3D printing company, which had become known for getting
anything and all things 3D. One of its many significant acquisitions, MakerBot, marked the begin of its demise. With this acquisition, Stratasys created a move away of its core business (industrial 3D printing equipment) to enter the consumer market (MakerBot). This loss of focus coupled with a drop in the demand of high value, high margin 3D printing equipment weighed significantly on their financial performance. The predator has now become the prey, ripe to be gaind.

Stratasys

Stratasys (SSYS) stock between 1/1/2013 and 2/10/2016

Stratasys has a Strong and Clean Balance Sheet

After accumulating numerous intangible assets throughout its acquisitions in the years major up to 2014, Stratasys has since drastically written off said assets. MakerBot’s net value has been reduced to nil of the over $500M recorded in 2013. Stratasys has given up on consumer 3D printing with no new products presented at CES in January 2016, paving the way for a refocus on industrial 3D printing equipment. SSYS has halved its headcount at MakerBot.

In Q3 2015, the company repaid its credit line in full, leaving them with a quite effortless $250M net cash position,and has reduced its investment budget and cash outflow.

A Renewed Shareholder Base

The Stratasys shareholder base has changed significantly in the last 6 months. Old guns have left, leaving space for activists. Baillie Gifford, the century-old investment firm which was the biggest shareholder with just about 10%, sold its stake in January 2016 (SEC Form 13G dated 8th of February 2016). Coatue Management, Riverbridge Partners and PrimeCap have all significantly increased their holdings. Stratasys is now the biggest holding at Destrier Capital Management, an activist hedge fund. These guys are pushing for a corporate event.

A Sizeable and Valuable Business

Stratasys yearly sales are estimated at $700M for 2015, a just about 50% increase of 2013. Gross margin at the core business is in the mid-40s, a level much like to 2013. Stratasys is a world leader with sturdy technology capabilities and a sizeable and profitable core business.

A Long list of Predators

Many sizeable tech companies have dipped their toes into 3D printing waters. So far they have refrained of investing significantly sizeable amounts. With valuations divided by 10, the price to gain a leader is becoming much additional manageable. HP, Dell, Apple, Canon, Google (recently invested $100M in Carbon3D) and Samsung are obvious players, alongside tech funds and 3D Systems…

Potential predators: HP, Dell, Apple, Samsung, Google, 3DSystems, Canon

HP, Dell, Apple, Samsung, Google, 3DSystems, Canon

Following the balance sheet clean-up, the refocus on the core business and with a renewed shareholder base of activists, Stratasys is ripe to be gaind. Sales of Stratasys shares by old gun investors and short sellers, has pushed down the valuation to under one year worth of sales. This should drive the predators to jump on the prey…

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Samuel Adams

About The Author

Samuel is passionate by value driven investment strategies on stocks and financial markets