3D printer manufacturer Stratasys Ltd. (NASDAQ: SYSS)
shares have been bleeding back down after peaking off its Q2 2020 earnings. The 3D printing group of stocks have been severely underperforming the benchmark S&P 500 index (NYSEARCA: SPY)
. The weakness in manufacturing and abrupt shutdown of factories worldwide disrupted the narrative of the 3D printing industry. Sentiment became bleaker on the heels of competitor 3D Systems (NASDAQ: DDD)
earnings release earlier this month. As the leader in 3D printing solutions, the bleak sentiment in Stratasys shares can present an opportunity for longer-term risk-tolerant investors at the right price levels.
Q2 FY 2020 Earnings Release
On Aug. 5, 2020, Stratasys released its second-quarter fiscal 2020 earnings report for the period ended in June 2020. The Company reported a loss of (-$0.07) per share versus consensus analyst estimates for a loss of (-$0.17) per share, a $0.07 per share beat. Revenues fell (-27.9%) year-over-year (YoY) to $117.6 million, missing consensus estimates of $121.74 million. The shortfalls were due to COVID-19 related impacts on manufacturers as customers’ facilities were abruptly shut down. Non-GAAP operating losses for the quarter was (-$8.1 million) versus a profit of $9.1 million YoY. Stratasys has $311 million in cash and no debt. Stratasys implemented cost controls and resizing that including (-5%) executive pay cuts, hiring freeze, reduction to 80% of work week remotely to cut Non-GAAP operating expenses by (19.8%) YoY. The Company expects COVID 19 to “weigh on business at least through the end of the year”.
Pandemic Sparks 3D Awareness
The newly installed CEO, Yoav Zeif, pointed out the strategy to bolster their leadership position in Polymer applications, the largest value pool. The COVID-19 pandemic has sparked “…greater interest in using 3D Printing to help them (customers) be more responsive in an increasingly uncertain world, from bringing new innovations to market faster, to creating more adaptive manufacturing lines and supply chains.”
The Future of 3D Printing
While retail usages of 3D printing is often seen as a craft or hobby endeavor, the true future of 3D printing lies with manufacturers who understand the cost and output benefits of using these agile game-changing technology. An April 2020 survey of 700 U.S. manufacturing processionals by the Society of Manufacturing Engineers found 25% were planning to change their supply chains to better address the pandemic. They ranked 3D printing and Robotics at the top of their list out of 11 technologies for implementing these changes, ahead of artificial intelligence and 5G. The industries ranged from aerospace, automotive to consumer products, defense, industrial machinery, medical and education.
Congress Pushes 3D Printing Solutions
Congressman Michael Burgess of Texas stated, “3D printing may account for up to 10% of U.S. manufacturing in the future.”, referencing the Advancing 3D Printing Act introduced by the U.S. House of Representatives in May 2020. This bill empowers the Consumer Product Safety Commission to evaluate solutions to secure the supply chain and powering the facilitation and innovation of 3D printing manufacturing solutions.
Factory of the Future Initiatives
Stratasys pointed out some key customers implementing their technology as an integral part of the “Factor of the Future”. Aerospace leader BAE Systems added to its portfolio of F900 printers. General Motors (NYSE: GM) “… added 17 production-grade FDM systems for prototyping to the production of toolings, such as jigs and fixtures, to be used on the factory floor.” During the March COVID-19 pandemic peak, Stratasys printers were utilized by General Motors to create all the tooling for manufacturing 30,000 ventilators for the U.S. government. The flexibility, speed, and productivity of 3D printing is what can take manufacturing to the next level of evolution. Stratasys is the leader in 3D printing technology solutions and shares are discounting these tangible long-term positives for the benefit of prudent investors. The Company has $5.69 cash per share (CPS) and a lofty 19.5% short interest, which can make for explosive spikes. The narrative is bright, but the sentiment is bleak, and this is where opportunistic pullbacks present themselves.
SSYS Opportunistic Price Levels
Using the rifle charts
on the monthly and weekly time frames provides a broader view of the landscape for SSYS stock. We are under the belief that almost any stock can become a value play if the price falls far enough. SSYS along with peer DDD are literally in freefall mode. The monthly rifle chart triggered a market structure low (MSL)
buy above $19.33 Fibonacci (fib) level
and weekly triggered above $17.81. The monthly rifle chart is turning more bearish as the rejection of the 5-period moving average (MA) at $16.00 is causing shares to accelerate lower as stochastic is crossing down under the 20-band. The weekly stochastic has been in a bearish mini inverse pup through the 20-band as shares formed an inverse pup breakdown on the rejection off the weekly 5-period MA at $15.00 fib with lower Bollinger Bands (BBs) targeting the $12.82 fib. Make no mistake, this chart is ugly but with $5.69 CPS, no long-term debt and manufacturers coming back online, there is value to be had. The opportunistic pullback price levels are at the $12.82 weekly lower BB/fib, $10.85 fib, $9.85 fib and $8.80 monthly lower BBs/fib as the VALUE play price.
Investors should set alarms should the price sink under $9.00 per share as an ultimate value play price level. Nimble traders can look to scalp longs off the key opportunistic pullback fib levels while keeping an eye on peer stock DDD. With 19.5% of outstanding shares and 35.41% of the stock float short, the short-term bounces can be explosive
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