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Why Stratasys Stock Just Popped 13%

By Rich Smith – Updated Jun 2, 2020 at 4:46PM

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Cost-cutting prompts an upgrade on Wall Street.

What happened

Shares of 3D printer-maker Stratasys (SSYS 0.69%) are up strongly in late-day Tuesday trading, rising 13.3% as we pass the 3:30 p.m. EDT minute mark.

You can thank the friendly analysts at JPMorgan for that -- but also Stratasys itself.

3D printer.

Image source: Getty Images.

So what

Earlier today, Stratasys announced a "resizing" of its workforce, which translates into 10% of its workers losing their jobs. The layoffs, which management says were in the works before COVID-19 struck but were "accelerated" by the pandemic, are "part of a strategic plan to accelerate growth with a leaner operating model." Moreover, the layoffs are "designed to reduce operating expenses as part of a cost realignment program" and help get Stratasys back on a path to growth.  

Cost savings -- and profits growth arising from them -- could begin emerging as early as Q2, inasmuch as management says the layoffs will save it about $30 million annually (or $7.5 million per quarter) but will cost Stratasys only "approximately $6 million in severance costs, primarily in the second quarter of this year."

Now what

Hearing this news, JPMorgan promptly upgraded Stratasys stock and revalued it toward $22 on the theory that less cost will yield more profit, leaving Stratasys a more valuable company at the end.

In a note covered this morning by, JPMorgan also noted that Stratasys is introducing new products in the second half of the year which, by driving sales at the same time costs are falling, should result in improved earnings at least by 2021.

After seven straight years of seeing their company report nothing but losses, that prospect is music to Stratasys shareholders' ears.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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