Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of leading 3D printing company Stratasys (NASDAQ:SSYS) closed up about 7% today following an upgrade from Wall Street research firm Oppenheimer earlier in the day.
So what: Oppenheimer upped its rating on Stratasys to "outperform" from "perform" today and set a 12-to-18-month price target of $50 per share, which implies a 43% upside to the stock's $34.97 closing price yesterday.
The analyst firm said the upgrade was due to valuation, commenting that Stratasys stock is cheap relative to its historical valuation and to that of its main peer 3D Systems. Furthermore, it noted that the company is executing well on its core industrial business and the MakerBot performance issues appear to be known, which eliminates some uncertainty. Indeed, excluding MakerBot -- which generally only accounts for about 10% to 15% of the company's total quarterly revenue -- Stratasys' first-quarter results show the company executed fairly well in its enterprise-focused business, despite a challenging macroeconomic environment, which is a factor beyond its control.
Notably, Oppenheimer now views Stratasys as the best 3D printing play -- this is a flip-flop from its previous opinion favoring fellow industry leader 3D Systems. The firm's upgrade note stated, "[W]e think it [Stratasys] is more secure and has more opportunities as new competition emerges." And, in fact, Oppenheimer dropped its rating on 3D Systems this morning to "perform" from "outperform," largely due to execution concerns.
Now what: Investors shouldn't put too much stock (excuse the pun) in analysts' ratings, as Wall Street firms are often late both to arrive at and to leave the party. That said, I've long opined that Stratasys is the best large, diversified 3D printing company, so I am in agreement with Oppenheimer on this point. However, that's not to imply that clear sailing lies ahead, as the competitive seas could be rough in 2016 and beyond due to increased competition, especially from deep-pocketed Hewlett-Packard and upstart Carbon3D. In my view, investors should remain cautiously optimistic.