3D Systems Divesting Simbionix; Shares Pop 7%

3D Systems Corp. (DDD), the innovator of 3D printing in the manufacturing industry, inked a deal to sell its medical simulation business, Simbionix, to Surgical Science Sweden AB for a deal value of $305 million. The acquirer supplies virtual reality simulators for medical training. Following the deal announcement, shares of 3D Systems jumped 7.2% to close at $26.73 on July 28.

Don't Miss Our Christmas Offers:

Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

The recent divestiture transaction completes the company’s plan to divest non-core businesses. Now, 3D Systems will focus completely on enabling additive manufacturing solutions for applications in growing markets that demand high-reliability products, the company said.

Post-completion of the deal, the combined entity of Simbionix and Surgical Science will enhance services in the simulation of medical procedures, including advanced robotic surgery.

3D Systems CEO Dr. Jeffrey Graves commented, “The proceeds from this sale, combined with previously announced divestitures, will leave us in a strong position, with a cash balance of approximately $500 million and no debt…we now move forward expecting strong organic growth and profitability, at both a gross margin and EBITDA margin level, and positive operating cash flow.”

The deal, which awaits certain customary closing conditions and adjustments, is likely to close this August. (See 3D Systems stock charts on TipRanks)

Following the deal announcement, Craig-Hallum analyst Greg Palm maintained a Buy rating and a price target of $29 (8.5% upside potential) on the stock.

Palm believes that the recent divestiture will allow the company to focus on growth and margin expansion in additive manufacturing solutions. Furthermore, the analyst foresees a buying opportunity at the recent pullback and expects 3D Systems to report positive Q2 results in the coming days, which might act as an additional catalyst for the stock.

Meanwhile, the Street’s consensus rating on the stock is a Hold. That’s based on 4 Holds, 1 Buy, and 1 Sell. Looking ahead, the average 3D Systems price target stands at $25, putting the downside potential at about 6.5% over the next 12 months.

According to the new TipRanks’ Risk Factors tool, the DDD stock is at risk mainly from two factors: Finance and Corporate, and Production, which contribute 38% and 19%, respectively, to the total risk for the stock. Within the Finance and Corporate risk category, 3D Systems has 8 risks.