SSYS - Stratasys purchase of Desktop Metal may be a mistake - analyst

2023-05-26 10:01:23 ET

Stratasys ( NASDAQ: SSYS ) planned purchase of Desktop Metal ( NYSE: DM ) may be a mistake, according to a William Blair analyst.

One issue with a transaction is a "lack of transparency' around the drivers of Desktop Metal's revenue growth and the composition of its product portfolio, William Blair analyst Brian Drab wrote in a note on Thursday. Drab also points out that DM's financials are "less attractive," including an operating loss of $233 million in 2022.

"The general trajectory of the core business at Desktop Metal relative to expectations makes us cautious regarding management’s ability to predict future growth in the business," Drab, who has a market perform rating on SSYS  wrote in the note.

Drab also highlighted that the deal is not a "straightforward transaction" as it is complicated by Nano Dimension's ( NASDAQ: NNDM ) $18 per share tender offer for Stratasys ( SSYS ). He expects that Desktop Metal ( DM ) holders are likely to approve the deal, as management and insiders own about a third of DM shares.

"Shares of Desktop Metal and Stratasys are both trading down 4%-5% in midday trading following the announcement of the deal—not a great sign in terms of investor enthusiasm regarding the combination," William Blair's Drab wrote on Thursday.

More on Desktop Metal, Stratasys and Nano Dimension

• Tough Times Ahead For Desktop Metal (Rating Downgrade)
• Nano Dimension increased price for Stratasys still undervalues company - analyst
• Nano Dimension bid for Stratasys doesn't have compelling valuation - analyst

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