Advanced AI Integration Will Streamline Operations And Boost Efficiency

Key Takeaways

• Expansion in buyer-supplier networks and international markets is set to drive revenue growth and broaden the customer base.
  
• AI integration and enterprise sales enhancements aim to improve margins and revenue efficiency, boosting overall profitability.
  
• Slow international expansion and integration challenges may impact short-term profitability and revenue growth amid fluctuating trade policies and a strong U.S. dollar.

Catalysts

Operates an artificial intelligence (AI) powered online manufacturing marketplace in the United States and internationally.

• Expansion of the buyer and supplier networks, facilitated by increased brand awareness and enhanced marketing efficiency, is expected to drive revenue growth through a larger customer base and improved engagement.
  
• The enhancement of enterprise sales capabilities and deeper enterprise engagement strategies could significantly boost revenue growth from large accounts, contributing to revenue stability and potential margin improvement.
  
• The integration of advanced AI models and multimodal AI to streamline the buyer process and improve quoting and manufacturing workflows can lead to higher gross profit margins and increased revenue through improved efficiencies.
  
• International expansion efforts, particularly in Europe and Asia Pacific, are expected to drive significant revenue growth, with the potential for international revenue to represent a larger share of total revenue.
  
• Improvement in gross margin and profitability through the application of AI and the optimization of supplier networks will likely enhance overall earnings and contribute to better net margins.

Xometry Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Xometry's revenue will grow by 17.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -9.2% today to 0.7% in 3 years time.
• Analysts expect earnings to reach $6.2 million (and earnings per share of $0.1) by about May 2028, up from $-50.4 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $23.0 million in earnings, and the most bearish expecting $-17.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 358.3x on those 2028 earnings, up from -25.9x today. This future PE is greater than the current PE for the US Trade Distributors industry at 19.4x.
• Analysts expect the number of shares outstanding to grow by 3.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.66%, as per the Simply Wall St company report.

Xometry Future Earnings Per Share Growth

Risks

• A stronger U.S. dollar negatively impacted Q4 revenue by approximately $0.5 million to $1 million, and is expected to impact 2025 revenue by approximately $4 million, which could affect overall revenue growth and profitability.
  
• Supplier services revenue declined 13% year-over-year in Q4, primarily due to a manufacturing contraction in the U.S., which could impact net margins and earnings if the trend continues.
  
• International expansion is still in early stages, particularly in Asia Pacific, which may require significant investment and time to become material drivers of revenue, affecting short-term earnings and net margins.
  
• Accelerating global sourcing strategy to adapt to volatile global trade policies could temporarily dampen gross margins due to increased costs, potentially impacting net margins and profitability in the short term.
  
• The ongoing integration and monetization of the Thomas platform is slow, with only 1% of listed suppliers being advertisers, which may limit revenue growth and net margins if not scaled effectively.

Valuation

• The analysts have a consensus price target of $32.2 for Xometry based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $40.0, and the most bearish reporting a price target of just $20.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $877.8 million, earnings will come to $6.2 million, and it would be trading on a PE ratio of 358.3x, assuming you use a discount rate of 7.7%.
• Given the current share price of $25.94, the analyst price target of $32.2 is 19.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.