Stratasys (SYSS) Stock Gaining Momentum Now: Here's Why

Shares of Stratasys Inc. (NASDAQ:SSYS) have been gaining solid momentum of late. One of the major reasons behind this could be the company’s better-than-expected results for first-quarter 2016, along with an encouraging guidance for the full year.

Notably, the stock has gained approximately 14% since it reported first-quarter results on May 9.

Though the company posted an adjusted loss in the quarter (excluding amortization, impairment and other one-time items but including stock-based compensation), the figure was narrower than the year-ago quarter level.

Moreover, the company’s revenues managed to beat the Zacks Consensus Estimate despite witnessing a year-over-year decline. Notably, quarterly results were hurt by difficult market conditions and a lower-than-expected performance at the MakerBot business.

Nonetheless, the company’s sustained efforts on turning around the MakerBot business were impressive. After announcing restructuring plans in Apr 2015, which included 20% job cuts, MakerBot is now trying to accelerate the adoption of 3D technology by raising awareness. In this regard, in July, the company decided to make the MakerBot Replicator Mini Compact 3D Printer available in all of the 600+ Sam’s Club stores across the country.

Earlier, they had been available in a few select Sam’s Club stores only. These initiatives reflect MakerBot’s strategy to increase the accessibility of desktop 3D printing for retail shoppers, which in turn, can accelerate its adoption. We believe that these initiatives will drive the company’s performance over the long run.

Furthermore, the company’s focus on the 3D printing market presents favorable long-term opportunities. Data from the Wohlers Report 2014 revealed that the worldwide 3D printing industry is expected to grow from $3.07 billion in 2013 revenues to $12.8 billion by 2018 and exceed $21 billion in worldwide revenues by 2020, with a CAGR of 34%. Moreover, pent-up demand for 3D printing products is expected from the automotive consumer products, government and defense, industrial/business machines, education research, and others (arts and architecture) segments.

Additionally, TechNavio expects the global 3D Printer market to grow at a CAGR of 45% during the 2014–2019 period. Being the 3D printing industry leader, these trends bode well for Stratasys and indicate strong growth prospects, going ahead.

However, some customers are delaying their purchases owing to the current economic conditions. In the 3D printer business, majority of customers have moved toward the lower priced uPrint, which may affect the company’s margins in the upcoming quarters. Going forward, competition from 3D Systems Corporation (NYSE:DDD) is a potent headwind as well.

Currently, Stratasys carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the technology sector are DST Systems Inc. (NYSE:DST) and Synopsys Inc. (NASDAQ:SNPS) , both of which sport a Zacks Rank #1 (Strong Buy).