Founder of Equities Research. Stockdiagnostics Specialist

Founder of Equities Research. Stockdiagnostics Specialist
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Thursday, May 9, 2013

Stratasys: Hyped Back Up Again!

Stratasys Ltd (NASDAQ: SSYS) closed today at $82.20 and is now up $22 (36%) in a ten week span.
(nearly $1billion increase in market capitalization)


On Monday the Company will report earnings before the opening bell and all of Wall Street is bidding up the stock in anticipation of a stellar report. This afternoon Janney Montgomery initiated coverage with a buy recommendation.

Readers of my work know that I warned SSYS was the most over priced stock in the market back in January and saw shares fall from an all time high at $94 to $60 within 5 weeks.
Well with shares bouncing back up over $86 this week, I am writing to alert readers again that there is a GREAT STOCK to short in the market again. right. Stratasys (SSYS)

Earnings Preview :
 Janney initiated coverage with a price target of $101 today.
With 38 million shares outstanding that's a projected $3.8 billion market cap.

For this company to trade at $101, they would need to earn $126 million net for the year at a PE multiple of 30.

TO put this in perspective, they earned less than $9 million in 2012 as a combined entity. (a 14 fold increase???)

Q1 will have this $300,000 tax credit, let's see if the Analyst treat it as operating income along with margins?
  •  In January of 2013, the President of the U.S. signed into law The American Taxpayer Relief Act of 2012, which contained provisions that retroactively extended the U.S. research and experimentation tax credit to 2012 and 2013. Because the extension did not occur by December 31, 2012, the Company’s effective income tax rate for 2012 did not include the benefit of the credit for 2012. However, because the credit was retroactively extended to include 2012, the Company expects to recognize the full benefit of the 2012 credit in the first quarter of 2013. The Company estimates that its credit for 2012 is approximately $300,000. That amount will be reported as a discrete income tax benefit in the first quarter of 2013.
.

Wall Street Analyst will need to include an additional 4 million shares outstanding to their 2014 EPS projections because on January 1,2014 management will add those shares to their ownership. (Bringing total to 42.5 million shares outstanding.
  • Upon the adoption of an amendment to the 2012 Plan at our extraordinary general meeting of shareholders in February 2013, the reserved pool under the plan consisted of 4,000,000 shares, which will be automatically increased annually on January 1 (beginning on January 1, 2014)


I can't believe  Wall Street Firms can get away with these RECKLESS Price Targets.

On April 13, 2012, the day prior to announcing the merger, shares of SSYS were under $35.00, with 21 million shares outstanding (for a $735 million market capitalization.)
So this is more than a stock going from $35 to $82 per share, this is about a company market capitalization going from $735 million to $3.2 billion in 1 year...when all they did was merge with another company to have the combined entity report $1.4 million Operating cash flow for 2012!


the new Stratasys (post merger) already reported financials as a combined company in the last SEC filing.
Together the new entity reported $1.4 Million in operating cash flow for the full year year 2012. (Stock is trading nearly 2300 times Cash Flow.)

Carrying $822 million of GOODWILL is another great line item. (or how about the HALF BILLION DOLLAR increase in INTANGIBLE assets?)


All the hype and fluff every where you turn, but at the end of the day its the financials that matter. It may see $94 again with all the bulls out there, but eventually it won't live up to the hype at these levels.
It will one day be a "dime a dozen" product that you can buy at walmart from some little competitor. THe company makes it sound like the NEXT APPLE on the NEEDHAM Conference during the 1st quarter.
I doubt everyone will "have to have" a 3D printer any time soon.

These 2 companies really needed one another. SSYS probably told OBJET, we'll value you at $1 billion if you don't mind us valuing ourselves at $1.2 billion. (we get a premium because we're a public company).
(THe original deal of the combined entities was valued at $1.4 billionchanged to $2.2 billion in Piper Merger disclosure during Q3 2013 in this DEF Proxy, and was changed again December (according to most recent 20F annual report, where Objet alone was valued at $1.4 billion:.
  •  
    As described in note 2, in December 2012, for accou
    nting purposes, Stratasys, Inc. was deemed to have
    acquired Objet for a purchase price of
    $1,341 million, and as a result, the Company recogn
    ized $797.1 million in goodwill.

Only problem now is OBJET shareholders will need to get liquid. 6 month period is June 1,2013 (December 3rd 2012 was close of deal).
  •  
    If certain of our shareholders sell a substantial number of our ordinary shares, the market price of our ordinary shares could decline.
         We have entered into a Registration Rights and Lock-Up Agreement with shareholders who held more than 90% of our issued and outstanding ordinary shares prior to the merger, and these shares now constitute approximately -38. 7% of our issued and outstanding shares as of February 15, 2013. The Registration Rights and Lock-Up Agreement provides, other than with respect to 7.5% of the ordinary shares owned by these shareholders as of December 1, 2012, that these shareholders will not sell or otherwise transfer their ordinary shares until after June 1, 2013, six months after the closing of the merger. It also requires us, at the request of the holders of 35% of the then-outstanding registrable securities under that agreement and subject to certain limitations, to register for resale and to list on NASDAQ ordinary shares that they seek to include in the registration. If the shareholders who are party to the Registration Rights and Lock-Up Agreement sell significant amounts of our ordinary shares soon after June 1, 2013, or demand registration of their shares, the market price of our ordinary shares could decline. The existence of these registration rights as well as any sales thereunder may also make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate to raise funds through equity offerings
I would guess SSYS will do an underwriting (like DDD just announced)) soon. (I mean that's how wall street keeps their lights on, raising money for hot hyped up sectors). Janney Montgomery initiating a buy this afternoon shows they are probably jockeying for position to get a slice of a deal.
Brokerage Firms aren't focusing (highlighting) on the statement of cash flow because it will make it harder to float a deal (raise capital) at these lofty levels.

SSYS NEEDS an underwriting because the EARNINGS QUALITY is so poor.

Does HP still hold their stock position? (the cost of the OEM agreement from 2010)
  •   During the third quarter of 2012, HP exercised its warrant for 500,000 shares through a “cashless exercise” in accordance with the terms of the warrant and was issued 360,115 shares of Stratasys, Inc. common stock.


57% of Shares Outstanding are held by 6 holders (as of February 14,2013)

  • Options Total
    Exercisable Beneficial Percentage
       Beneficial Owner     Ordinary Shares      within 60 Days       Ownership       Ownership   
    Samson Capital, LLC (1)   4,267,647   (2)  -- 4,267,647 11.12 %
    Roy J. Zuckerberg   4,831,887 (3) -- 4,831,887 12.59 %
      Elchanan Jaglom 4,793,485 (4) -- 4,793,485 12.49 %
    AGM Holding BV (5) 2,981,336   (6) -- 2,981,336 7.77 %
    Philippe J. Setton 2,728,518 (7) --     2,728,518 7.11 %
    FMR LLC (8) 2,758,771 (9) -- 2,758,771 6.73 %

Looking for Color on Conference Call on this recently filed lawsuit:
  •  
    On March 4, 2013, we were notified of two lawsuits purportedly filed in an Israeli district court against us by four current or former minority shareholders and former directors of our company. The lawsuits purportedly demand that we amend the capitalization table of our company such that certain shares previously issued to Objet shareholders named as defendants would be recognized as being owned by the plaintiffs with a consequent reduction of the share ownership of the named defendants. The lawsuits also name as defendants Elchanan Jaglom, Chairman of the Executive Committee of our board of directors, David Reis, our Chief Executive Officer, various shareholders of ours who were also shareholders of Objet, and, in one of the lawsuits, Ilan Levin, one of our directors. The lawsuits allege in particular that a series of investments in Objet during 2002 and 2003 was effected at a price per share that was below fair market value, thereby illegally diluting those shareholders that did not participate in the investments. The plaintiffs also allege that a portion of the amount invested in those transactions was actually invested by an investor who was already a shareholder of Objet and allegedly acting in concert with Mr. Jaglom, and that the interest of these two shareholders in these transactions was not properly disclosed to the minority shareholders at the time. The lawsuits furthermore claim that we effectively engaged in backdating the issuance of certain shares, in that shares that Objet reported as having been issued in 2006 and 2007 were actually issued at a subsequent date—as late as 2009.

Past Posts on this ticker from earlier this year:

Here's Another Short Pick that is DESPERATE for Cash: 
click link below:

Most OverPriced Stock Titan Machinery Files Proxy Statement


2 comments:

  1. Excellent, and agree with you on SSYS will be watching for top. Thanks for the info appreciated and useful.

    ReplyDelete
  2. Janney initiated coverage with a price target of $101 today.
    With 38 million shares outstanding that's a projected $3.8 billion market cap.

    For this company to trade at $101, they would need to earn $126 million for the year at a PE multiple of 30.

    TO put this in perspective, they earned less than $9 million in 2012 as a combined entity.

    SO Janney is expecting NET INCOME increase 14 fold.

    I can't believe this Wall Street Firms can get away with this RECKLESS Price Targets.



    On April 13, 2012, the day prior to announcing the merger, shares of SSYS were under $35.00.

    ReplyDelete