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Technology Stocks : 3-d Systems (TDSC)
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To: Robin who wrote (4)1/26/1997 11:35:00 PM
From: Stratajema   of 132
 
There are also other companies in the rapid prototype/visual concept market. They are Cubital, DTM, BPM Technology, and Sanders Prototype. 3D Systems has essentially surrendered the office concept modeling market to Stratasys (SSYS). 3D Systems' primary market continues to be service centers and manufacturing centers.

Keep in mind that tooling orders are very interest rate sensitive. If we see interest rates move up then expect demand for 3D's machines to fall since the purchase price of their machines represents a large capital expense to buyers. (I'd warn you to sell if interest rates rise but this advice is worthless since the entire stock market will crash at even a hint of higher interest rates.) Mitigating this risk somewhat is 3D's decision to begin financing sales to customer and thus they can "control" the interest rate in the sale or lease arrangement.

Also, historically the January to April period is when tooling stocks tend to underperform the broader market and no one really knows why, its just that demand for these stocks seem to be weaker during this time period.

My estimate (and even some analysts) see TDSC earning about 40c to 65c in 1997. The 65c estimate is aggressive and factors in savings from moving manufacturing to Colorado. At $16, this would put the forward P/E ratio at 25x to 40x. To maintain this stock price, 3D is going to have to show top line revenue growth of 25%+ otherwise this stock is heading for the basement in the $10 range. (However, no one has a crystal ball not even me!)

I would welcome comments and insight into 3D's management team which I know very little about outside of the investment literature. I'm not an investor in TDSC but I am a "transient investor" in SSYS.

Happy investing. I'm anxious to see 3D's 4th quarter results.

Regards,
David
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