Why Goldman Sachs sees more than 35% upside in this 3D printer stock – 24/7 Wall St.

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Technology

Markforged Holding Corp. (NYSE: MKFG) may be one of the lesser-known investments in Cathie Wood’s ARK Invest portfolio, but a top analyst is eyeing it for big gains on the horizon. Goldman Sachs recently appealed to the 3D printer maker looking for a significant edge.

ARK Invest holds this stock in two separate funds. ARK Autonomous ETF (NYSEARCA: ARKQ) has 9,522,101 shares, worth approximately $65.7 million, as of December 21. ARK Space ETF (NYSEARCA: ARKX) has 1,800,502 shares, worth $8.6 million. Cumulatively, ARK Invest holds 11,333,603 shares, with a total value of $74.3 million.

Goldman Sachs recently launched coverage of Markforged with a buy rating and price target of $6.50. This implies a 35.7% upside from the last closing price of $4.79 per share.

In the report, Goldman Sachs detailed:

We note that the company’s proprietary CFR technology enables it to deliver materials 10 times stronger at 2-3 times the cost to critical industries. This capability means that Markforged is used much more for production parts than peers that are primarily used for prototyping. We are also positive about the company’s AI-powered software offering which provides continuous updates to optimize the existing printer fleet for customers. We believe that investor expectations for 3D printing have moderated considerably following the drop in peer guides and that this presents an attractive risk-reward opportunity at current stock levels. Even though we are modeling below the company’s published guidance, we believe investors are now likely assuming a bearish scenario for the launch of a key new product, the FX20. In our own model, we take a conservative approach and still believe there is a significant upside in MKFG stock.

Thus, the highly anticipated FX20 printer is expected to start shipping in 2022 and is expected to triple existing sales by 2024, according to management. However, Goldman Sachs believes it is too early to predict the trajectory of FX20 sales. Additionally, based on conversations with Markforged customers and distributors, the investment firm believes the company is seeing strong initial customer interest in the FX20.

It should be noted here that Markforged has a prestigious list of clients spanning major industries including Tesla, Porsche, NASA, Lockheed Martin, US Air Force, Regeneron, and Medtronic.

Overall, the company offers an attractive risk-reward ratio at this point. Moreover, with the support of ARK Invest, investors could breathe easier. On the other hand, an increasingly competitive 3D printing industry may experience headwinds, and adoption of the FX20 remains to be seen.

Markforged shares rose about 5% to $5.05 on Tuesday, in a 52-week range of $4.72 to $15.10. The consensus price target is $11.83.

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