Stratasys, DM merger provides greater opportunity long-term, says Credit Suisse

Credit Suisse analyst Shannon Cross notes that Stratasys (SSYS) reiterated its commitment to acquire Desktop Metal (DM) and the Board dismissed 3D Systems’ (DDD) $19 cash/stock offer. The firm expected Stratasys to reject the unsolicited offer given the Board determined Nano Dimension’s (NNDM) $20.05 offer in April undervalued Stratasys. Further, Credit Suisse believes 3D Systems could increase the proposed exchange ratio to 1.7 while maintaining 51% control and raising the full offer to $24/share. However, on Tuesday Stratasys essentially established a floor of $30/share which is where it sees the valuation of a combined Stratasys and Desktop Metal. The firm thinks a merger with DM provides greater opportunity long-term, specifically related to scaling of the latter’s technology across Stratasys’ go-to-market and integration of more mature operations, while a merger with 3D would likely generate higher near-term profitability through elimination of duplicative costs but limited long-term growth potential. Credit Suisse has an Outperform rating on Stratasys’ shares with a price target of $20.