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Why Stratasys Ltd's Shares Popped 28.5% in August

By Travis Hoium - Sep 7, 2018 at 6:57AM

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Investors saw enough from earnings to push shares higher, but there are reasons to be skeptical of this stock.

What happened 

Shares of 3D printing company Stratasys Ltd ( SSYS 2.69% ) jumped 28.5% in August, according to data provided by S&P Global Market Intelligence, after reporting better than expected earnings. Could this finally be the turnaround that 3D printing investors have been looking for the last few years? 

So what 

Second-quarter revenue was essentially flat at $170.2 million and non-GAAP net income was $8.1 million, or $0.15 per share, down from $9.2 million a year ago. While the top and bottom line both fell, investors were expecting even worse results with Wall Street setting expectations for $0.09 per share in earnings

Person printing a 3D part.

Image source: Getty Images.

What's even more striking is that the move in shares occurred while management guided for $25 million to $41 million in GAAP net losses for the full year. Non-GAAP earnings are expected to be $0.30 to $0.50 per share, but that figure pulls out very real costs like share-based compensation and reorganization costs. 

Now what 

Investors seem to be looking for a reason to buy Stratasys shares and an earnings beat was enough to get them excited last month. But stepping back it's hard to see this as a sure sign that operations are turning around. Revenue was flat, GAAP losses are expected to continue throughout the year, and even on a non-GAAP basis shares are trading at 46 times the top end of guidance. That's hardly a value for a company that isn't growing and will keep me from buying this pop in shares. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stratasys Ltd. Stock Quote
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$25.92 (2.69%) $0.68

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