| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3285 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
Stratasys molding a winning formula with strategy to focus on manufacturing applications (38.20 +3.71) Stratasys (SSYS), which was a high-flyer during the 3D-printing phenomenon several years ago, is making a notable comeback after falling off many investors' radar screens. The company, along with competitors 3D Systems (DDD) and voxeljet (VJET), never truly lived up to the hype adorned on them when 3D printing burst onto the public scene about a decade ago. At that time, the possibilities seemed endless for 3D printing as the companies and their investors envisioned everything from toys, to packaging, to aircraft parts being produced by the equipment. Looking back, this grandiose view may have been a main stumbling block for the industry because it clouded the ability to identify the best target markets for the technology. Based on SSYS's solid beat-and-raise quarterly report, it seems that the company is finally finding the right home for its business. Specifically, last August, SSYS shared its new strategy with investors, stating that the company will hone in on the fastest-growing manufacturing applications. Meanwhile, prototyping applications, which have lower utilization rates, according to SSYS, will move to the back-burner. The shift in the company's go-to-market strategy is significant because only ~25% of its FY20 revenue was derived from manufacturing solutions. However, the potential rewards are also substantial since manufacturing represents a much larger addressable market than prototyping. Additionally, manufacturing customers generate more recurring revenue from consumables, resulting in a higher-value opportunity. SSYS's $100 mln acquisition of Origin last December served as a major step in this transition. In particular, Origin's proprietary "Programmable PhotoPolymerization" technology will bolster SYSS's production-oriented applications. While SSYS is experiencing some initial success with its new strategy, the full impact will take some time to materialize. In fact, the company anticipates that Origin will be a more meaningful contributor next year and beyond, forecasting the acquisition to generate up to $200 mln in new annual business by 2025. Simultaneously, the pandemic-induced economic headwinds that battered the company in FY20 should ease this year as vaccines become more accessible. Last year, factory shutdowns and office closures pressured sales of systems and consumables. With revenue increasing by 11% sequentially in Q4, the company sees early indications that pent-up demand is surfacing. After fizzling out and becoming a mostly-forgotten busted growth stock, it's interesting and rather surprising to see SSYS reemerge. While SSYS may never live up to the sky-high expectations placed on it long ago, the company can successfully reinvent itself and produce improved financial results that recapture investors' attention. The company's 4Q20 strong report did just that, sparking renewed enthusiasm in the stock. |