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Piper Jaffray Suspects HP Is Siphoning Off Demand From 3D Systems, Downgrades To Underweight

Piper Jaffray Suspects HP Is Siphoning Off Demand From 3D Systems, Downgrades To Underweight - 3D Systems Corporation NYSE:DDD, Hewlett-Packard Company NYSE:HPQ

Following Q2 checks, Piper Jaffray’s Troy D. Jensen believes 3D Systems Corporation DDD 9.31% witnessed a meaningful slowdown in printer demand during the quarter, with checks suggesting that demand was “more challenging than ever.”

Jensen downgraded the rating on the company to Underweight, while lowering the price target to $10.25.

Demand Concerns

“As a result of poor demand and internal challenges, we have become more cautious on DDD’s near term outlook,” the analyst explained.

Jensen believes the launch of Fusion Jet by HP Inc HPQ 0.79% has impacted demand, attracting existing 3D Systems channels to partner with HP.

“We believe the competitive landscape continues to intensify, channel relationships remain stressed and any cost cuts DDD can find will likely be offset by increased spending on R&D and Service/Support,” Jensen mentioned.

Piper Jaffray’s 2Q16 survey showed that the weakness was spread across 3D Systems’ entire portfolio, and Jensen believes this slowdown in demand was driven by a saturated 3D printing market, the entrance of HP and Carbon 3D, along with macro headwinds that lead to a pause in capex spending initiatives.

More Than Demand

“However, we believe 3D Systems challenges go much deeper than an overall spending slowdown, and believe system quality issues and unhappy channel partners continue to negatively impact system demand,” the analyst stated.

The EPS estimates for 2016 and 2017 have been lowered, as have the 2015 revenue and sales estimates.

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