Here’s Where to Lock Profits on Stratasys (NASDAQ: SSYS) Stock

3D printer and software technology solutions provider Stratasys NASDAQ: SSYS stock was highlighted in a MarketBeat Original article “Stratasys NASDAQ: SSYS Shares are a Beaten Down Value Play Here” on Aug. 24, 2020.  Share fell to the opportunistic pullback buy levels below the $12.82 several times before exploding up to $24.36 on Dec. 23, 2020. The shares spiked as the narrative of industrial 3D printing applications for electric vehicles (EVs) prototypes triggered momentum buying. As mentioned in our MarketBeat article, the industrial applications are the big growth drivers especially in the automotive sector. The COVID-19 vaccine rollouts can help accelerate the return to normalcy as manufacturing improves. Prudent investors who took positions earlier in the year might want to lock some profits into opportunistic exit price levels before a larger channel tightening reversion kicks in.

Q3 FY 2020 Earnings Release

On Nov. 12, 2020, Stratasys released its fiscal third-quarter 2020 results for the quarter ending September 2020. The Company reported an earnings-per-share (EPS) loss of (-$0.05) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.07), a $0.02 beat. Revenues fell (-18.8%) year-over-year (YoY) to $127.9 million beating analyst estimates for $122.14 million. Non-GAAP EBITDA was $5.2 million improved sequentially by $6.8 million, but well below the $14.5 million for Q3 2019.  

Conference Call Takeaways

Stratasys CEO, Yoav Zeif, noted the sequential improvement in Q3 expected to spread into Q4, which he believe is the “beginning of a recovery from the pandemic.” He stated, “We were encouraged by the improved sales of hardware and consumables in government, specifically its aerospace sector, as well as healthcare and education. He reiterated the new strategy of leading the polymer 3D printing market which is the largest value pool in additive manufacturing, “We are confident we will achieve our objectives to be the first choice of polymer production across aero, auto, dental, healthcare and all of our end markets, resulting in growth and value creation for customers and shareholders.” Stratasys CFO Lilach Payorski addressed the goodwill impairment in the Q&A segment, “within the FDM and PolyJet, we do expect to see growth, but given COVID-19 impacts significantly, I would say short term between two to three years, it will take time to go back to pre-2019 levels.”

Recent Events

On Nov. 24, 2020, Volkswagen OTCMKTS: VWAGY purchased two J850 3D printers for the creation of full color prototypes for interior and exterior vehicle applications to optimize the design process. Volkswagen is an innovator with big plans to have all their vehicles be electric by 2030 with investments in EV battery technologies. Stratasys shares started its ascent on this announcement driven by the halo effect of EV applications for its technology. Momentum was further bolstered when Stratasys announce the $100 million acquisition of 3D printing start-up Origin on Dec. 9, 2020. The acquisition of Origin’s proprietary Programmable PhotoPolymerization (P3) technology will bolster Stratasys’ mass production parts segment with a next-gen photopolymer platform. The Company expects the acquisition to add up to $200 million in incremental annual revenues within five years. The acquisition will use a combination of $45 million in stock and $55 million in cash composed of $60 million upon closing and $40 in incremental performance-based earnouts over three years. The transaction is expected to close in January 2021. Prudent investors may want to trim profits as the momentum starts to rollover on shares.

 SSYS Opportunistic Exit Levels

Using the rifle charts on the weekly and daily time frames provide a precise near-term perspective of the price action playing field for SSYS stock. The weekly rifle chart is peaking out as shares formed a market structure high (MSH) sell trigger below $20.01. The weekly stochastic forced a short-squeeze on the pretzel mini pup in November, causing shares to surge up through the $24.16 Fibonacci (fib) level. The weekly 5-period moving average (MA) support has risen to $19.95 as the stochastic is peaking near the 90-band. The daily rifle chart formed a shooting star and subsequent MSH trigger under $21.39 causing the daily stochastic to form the crossover down through he 80-band as the oscillation continues through the 60-band. The daily 5-period MA has sloped down at $20.86 tightening the channel at the 15-period MA at $20.62. The daily rifle chart is on the verge of a breakdown and ensuing downtrend unless shares can recover back up through the $21.39 MSH trigger. Prudent investors can still use opportunistic exit price levels from $19.74 up to the $25.16 fib levels with a trail stop at $19.33. The higher price levels can only be achieved with a daily stochastic cross back up reversal most suitable for longer-term investors willing to sit through a full oscillation. Keep in mind the daily lower Bollinger Bands (BBs) sit at the $15.66 fib. This is why the $19.37 fib trail stop is useful to sidestep a potentially deeper pullback before shares can bounce. Either way, it’s prudent to trim some profits while the weekly stochastic is still above the 80-band, before a crossover down.