Traditional printers can tap growing 3D printing market via strategic M&A - analyst
According to an analyst, Hewlett-Packard Co. (HPQ) and Seiko Epson Corp will have a chance to move away from the declining market of paper-and-ink printing by making strategic acquisitions or consolidations with small but promising 3D printer companies.
Three-dimensional printers first gain recognition when Nike Inc used the technology to develop footwear for players of the National Football League, which will be used in the Super Bowl this weekend, Bloomberg said. Early on, Hewlett-Packard and Seiko Epson had expressed their interests in shifting their business focus into this niche market, which is predicted to grow twice by year 2017, the news agency said. BB&T Corp. suggested that as opposed to building their own 3D printers, both HP and Epson could start capturing growth in this market by acquiring companies like Stratasys Ltd.
BB&T Virginia-based analyst Holden Lewis told Bloomberg in a phone interview, "The first machine was essentially a glue gun compared to what they do today, so to be starting from scratch is to be behind by a lot of patents and a lot of history that you have to make up. (Stratasys) would be an appealing little nugget to sort of fast-forward that process."
According to data compiled by the news agency, Stratasys' deal price is at a 33% discount compared to its rival, 3D Systems Corp. Credit Suisse analyst Jon Shaffer believed that Stratasys might demand 25% premium of its company value for a deal price, at the very least, which would be around $152 per share. Bloomberg corroborated Shaffer's theory with data it has compiled, which showed that Stratasys' $5.2 billion enterprise value is 7.8 times its estimated revenue for this year alone. When compared to the 11.7 multiple for 3D Systems, it is to assume that acquiring Stratesys will be a great deal.
FBR analyst Ajay Kejriwal said over the phone, "There's no reason why it should be at a discount (based on fundamentals. Stratasys has) a high-quality profile of products and technologies. It has a very solid management team and very good brand names."
When asked if the company was open for a sale, Stratasys spokesman Shane Glenn refused to comment, citing company policy.