1Q24 Accountability: Right & Wrong
As an analyst we believe it is critical to hold ourselves accountable to our calls and recommendations. Post earnings, we publish a quarterly recap note called Right & Wrong, recapping where we were right and where we were wrong with our companies under coverage.
Where I Was Right
Materialise MTLS 0.00%↑ (BUY): Materialise reported upbeat 1Q24 results with revenues and profits exceeding consensus expectations. Materialise also highlighted the fundamentals across all 3 segments remains strong and reiterated 2024 guidance. We believe Materialise shares have meaningful upside over the next 12+ months and remain STRONG buyers. Demand for 3D printing patient specific surgical tools and implants continues to rise, and driven by pent up demand for elective surgeries and expansion into new applications we expect the Medical business to continue to see double digit growth for the next several years. Materialise generates $100M+ from its Medical business annually. When you couple this growth, with the Company’s ~30% Medical segment EBITDA margins and a conservative 15x EBITDA multiple, you get a value that is greater than the company’s current market cap alone…Furthermore, the Manufacturing segment has positioned itself as a leading service provider of 3D printed production parts, which we expect to drive high-single digit growth once macro conditions improve. Lastly, we expect profitability to improve under the company's new CEO. Materialise is currently trading below ~5x EV/EBITDA multiple based on 2025 consensus estimates, which compares to the 5-year average of ~40x. Based on our current forecast, we value MTLS at $14.66 per share, which equates to ~200% upside.
View our latest MTLS notes and full downloadable financial model.
Protolabs PRLB 0.00%↑ (BUY): Protolabs reported strong 1Q24 results with revenues, gross margin and EPS all coming above consensus expectations. We suspected this in our positive 1Q24 Pricing Analysis. While 2Q24 guidance came in a little lighter than expected, Protolabs expects to grow in the June quarter. We continue to remain bullish on Protolabs and believe they continue to show strong execution in a challenging macro environment. We believe the combination of Protolabs Factory and Network business positions the company as a clear leader in the digital manufacturing space. We expect the combination will allow Protolabs to acquire new customers, and more importantly grow wallet share per customer given the company’s internal manufacturing capabilities. We plan to publish our 2Q24 Pricing Analysis in July, but want to highlight Protolabs pricing has remained almost unchanged as Xometry pricing continues to decline weekly. Protolabs is currently trading at ~8x EV/EBITDA based on 2025 estimates, which is well below the company’s 5-year average of ~20x. Based on our current forecast we value Protolabs at $55.82, which equates to ~75%+ upside at current levels.
View our latest PRLB notes and full downloadable financial model.
Xometry XMTR 0.00%↑ (SELL): Xometry announced 1Q24 revenues that exceeded Management and consensus expectations, which we expected based on our 1Q24 Pricing Analysis. However, higher operating expenditures only translated into adjusted EBITDA loss that was in-line with the Company and analyst estimates. Furthermore, 2Q24 revenue guidance missed modestly, and accelerated international and enterprise investments are expected to drive a higher adjusted EBITDA loss than what analysts were expecting. Xometry moved away from their original commentary where they expect to be adjusted EBITDA positive in Q3 and onward. Rather the Company expects to reach EBITDA profitability when the company hits a run-rate of $600M ($150M per quarter) with gross margins of 38%-40% gross margin. We continue to applaud Xometry for being able to grow double digits in a challenging manufacturing environment, but we remain cautious on the Company’s revenue outlook with the quick emergence of new marketplace players such as Protolabs. Following 1Q24 results, our bearish thesis remains intact as we believe the Company’s inability to increase revenue per active buyer will force the Company to continue to accelerate spend to grow and underwhelm investors profitability expectations. These all support our bearish stance and $8.71 price target, which equates to ~40% downside.
View our latest XMTR notes and full downloadable financial model.
Ondas Networks ONDS 0.00%↑ (BUY): Ondas reported 1Q24 results that fell below consensus expectations, as extended timelines related to the Class 1 railroad network upgrade and supply chain disruption in their Autonomous business impacted sales in the quarter. While Management was disappointed with their 1st quarter performance, the Company sounded very upbeat on their outlook and growth accelerating in 2H24. Ondas has not provided quantitative 2024 guidance, but continues to expect to generate significant revenue growth for the full year. While discouraged with Ondas results, as we highlighted in our initiation report we expected these large network upgrades and drone deployments will take time and anticipate revenues can be lumpy quarter-to-quarter. Although our biggest concern around additional capital needs remains present, our positive outlook on Ondas long term remains unchanged. We believe Ondas Networks and Ondas Autonomous are strongly positioned in two robust secular tech trends (Industrial IoT and Drones) that are both still in the early innings of adoption. Although the company will need to raise cash, which could include spinning out the Autonomous business, we believe the stock accretion opportunity significantly outweighs future dilution. In turn, we remain buyers of Ondas with a 3 - 5 year horizon. Our robust outlook drives our bullish stance on Ondas shares and price target of $2.91, which equates to ~370% upside at current levels.
View our latest ONDS notes and full downloadable financial model.
Where I Was Wrong
Tekna TEKNA.OL (BUY): While discouraged with the 1Q24 revenue performance that was largely due to timing of new system deployments and lower material sales to 3D OEMs, our view on Tekna’s long-term opportunity has not changed. The Company saw strong order growth continue in the quarter led by material bookings up ~25% Y/Y. Furthermore, despite the revenue shortfall, gross margins remained stable and we believe the company could reach adjusted EBITDA breakeven or better in 2H24. Given the company’s strong pipeline, Tekna reiterated their 2024 guidance, which calls for revenue growth and margin improvements on a Y/Y basis. The company also provided bullish longer-term financial targets through 2027, which includes 25-30% annual revenue growth and ~20% adjusted EBITDA margins by 2027. We believe Tekna is in the early innings of a multi-year super cycle as demand for their advanced metal materials and plasma systems grow across applications in 3D printing, consumer electronics, aerospace and medical. In turn, we view the near term misstep as an attractive buying opportunity for long-term investors. Assuming Tekna can execute on their aggressive growth trajectory, we believe there is 440%+ upside potential in the stock and remain strong buyers. We do want to highlight on May 29th, the VP of Sales & Marketing purchased 35,000 shares at a price of 5.01 NOK. Based on our current forecast we value Tekna at 29.93 NOK, which equates to ~440%+ upside at current levels.
View our latest TEKNA.OL notes and full downloadable financial model.
AutoStore AUTO.OL (BUY): AutoStore reported mixed 1Q24 results with revenues and adjusted EBITDA falling short of expectations, but demand for their solution remains strong as order growth exceeded analyst estimates. Unfortunately, the revenue and profit shortfall weighed on shares with the stock trading down 15% on these results post earnings, but shares rebounded the falling day on two analyst upgrades. We believe the Q1 revenue shortfall is purely driven by a timing issue, and not an indication of slowing demand as orders grew 11% Y/Y in Q1. Given the size of these deployments, we believe it is a normal course of business for sales to be pushed out due to timing that will create buying opportunities for long-term focused investors. That said, we remain very upbeat on AutoStore’s long term opportunity as a leader in the quickly emerging warehouse automation space. We believe the company will return to 25%+ growth as macro conditions improve. Furthermore, the company has been able to grow profitably. Driven by ~70% gross margins and lean partner driven operating model, the Company is consistently reporting adjusted EBITDA margins north of 45%. AutoStore is currently trading at 13x EV/EBITDA based on 2025 estimates, which is below our industrial tech comp group (~25x) and their closest public peer Symbotic (~55x). Based on our current forecast we value AutoStore at 30.30 NOK, which equates to ~100%+ upside at current levels.
View our latest AUTO.OL notes and full downloadable financial model.
Symbotic SYM 0.00%↑ (HOLD): Symbotic reported strong 1Q24 results with revenues and adjusted EBITDA coming in above the Company’s previous guidance and consensus expectations. Symbotic highlighted they made significant advances in both software and hardware during the quarter that accelerated deployment times, which drove faster revenue growth, higher margins and stronger cash generation than planned in the quarter. Furthermore, the company provided stronger than expected Q2 revenue guidance. Robust Q1 execution and strong outlook drove shares up ~10% immediately following the release. We continue to view Symbotic as a clear leader in the warehouse automation space, and are impressed with the Q1 execution. However, heading into earnings, analysts were calling for adjusted EBITDA to grow from $159M in CY24 to $409M in CY25. The company is still scaling up deployments and we believe revenues and profitability may be lumpy. For a company trading at ~60x EV/EBITDA, we believe the current bar is set very high and any slight miss would cause shares to decline significantly. In turn, we remain on the sidelines, but would closely monitor Symbotic and watch for a pullback to start building a position. Based on our current forecast we value Symbotic at $31.59.
View our latest SYM notes and full downloadable financial model.
Imping PI 0.00%↑ (HOLD): Impinj reported solid 1Q24 results, which came in above Managements and Street expectations. However, as a result of the positive settlement related to the NXP patent lawsuit, Impinj provided significantly better 2Q24 guidance. Strong Q1 results and guidance had shares up 10%+ after-earnings, and as expected shares have traded up 40% with improving profitability expectations. As a result of this newly announced ongoing IP fee, faster than expected demand recovery for endpoint ICs and strong cost controls, our concern about Impinj’s lofty profitability expectations has dwindled. In turn, we see limited downside given the positive catalysts that will be taken from the Q1 earnings call, but feel shares are fully valued and move to a HOLD rating. That said, it is worth noting following the 40% runup in shares, PI is trading at ~60x EV/EBITDA based on 2025 estimates. In the event of a meaningful pullback we would use the opportunity to consider building a position given Impinj’s long term growth opportunity. Based on our current forecast we value Impinj shares at $107.07.
View our latest PI notes and full downloadable financial model.
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