This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines feature a switch in sentiment between oil majors ConocoPhillips (NYSE:COP) and Statoil ASA (ADR) (NYSE:STO). But before we get to those two, let’s take a quick look at why one analyst is…
Giving 3D Systems an A+
Our first analyst news of the day concerns three-dimensional “printing” company 3D Systems Corporation (NYSE:DDD), recipient of a hike in price target from Canaccord Genuity this morning. Canaccord says it’s responding to new data from 3D’s “analyst day”, at which the company reiterated its earnings guidance for this year, and noted that the company’s recent acquisition of Phenix Systems “could contribute modestly to 2013 results and become a substantial driver of printer revenue in 2014.”
These catalysts were enough to convince Canaccord to raise its price target on the shares to $55, but should they be enough to convince you to buy?
I’m not so sure. As I noted in my write-up of the Phenix purchase last week, 3D Systems Corporation (NYSE:DDD) is paying $15 million for an 80% stake in a company that is “currently unprofitable, cash flow-negative, and generated revenues of only $6.1 million over the past year.” In the short term at least, that doesn’t sound like a very compelling buy.
On the other hand, though, at this stage in its lifetime, tiny Phenix should be growing much faster than its new parent company, which according to Yahoo! Finance estimates is pegged for only 16.5% annualized profit growth over the next five years. Boosting that growth rate — a lot — will be key to helping 3D Systems Corporation (NYSE:DDD) maintain its heady earnings multiple which already stretches into triple digits.
Personally, though, I still think the stock’s more hype than value at a P/E ratio of 107, and a price to free cash flow ratio not much lower than that. Canaccord says you should buy it, but I would not.
COP goes pop!
Moving now to the switcheroo, analyst Howard Weil cut its rating on ConocoPhillips (NYSE:COP) to “sector perform” Tuesday. Simultaneously, it moved its Norwegian rival up a notch to take Conoco’s former position as a recommended “sector outperform.” Why?
Well, right off the bat we can see that ConocoPhillips (NYSE:COP) shares, up 11% over the past year, have held up better than Statoil ASA (ADR) (NYSE:STO) — down 6%. Conoco now costs about 10.1 times trailing earnings, versus just a 6.8 times P/E ratio for Statoil. From a dividend perspective, Statoil also seems the better bet. According to S&P Capital IQ data, the Norwegian oil concern pays its shareholders a 5.3% annual dividend, versus 4.3% at ConocoPhillips (NYSE:COP).
