The Future Will be Printed in 3D
Joseph is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Three dimensional printing is gaining in popularity, and keeping it on the radar for related investment opportunities may be a good idea. 3D printers are now capable of printing parts for a working, firing gun, or even creating vinyl records that actually play on a record player.
Sound like just a fad? 3D printing is finding more mainstream practical uses as well, with Ford (NYSE: F) deciding to give 3D printers to their engineers to assist them with prototype designs. Some are even experimenting with the technology to print cheap electronic devices and components. The possibilities are endless. Imagine how the ability to print 3D objects will change the manufacturing process. The next technological explosion may be 3D printing.
3D Printing Firms
After a recent merger with an Israeli company named Objet, Stratasys (NASDAQ: SSYS) has become the largest pure 3D printing firm by market cap. The second largest publicly held company by market cap is 3D Systems (NYSE: DDD). Both firms have already had significant run-ups this year:
With sky-high valuations (both companies are priced at 80-90 times earnings) has the 3D ship already sailed? Or are there other ways to gain exposure?
3D Printing as a Source of Growth and Even Revival
Hewlett-Packard (NYSE: HPQ) once had a deal going with Stratasys to manufacture 3D printers, but the partnership has since been discontinued. Still, HP could and should get back into 3D printing, and has the cash for research and development if they so choose to get their foot into the game. Forbes laid out a good case for the company shifting from exclusively 2D to 3D printing as well. HP is already a major player in the printer and inks market, so becoming the go-to company for 3D printers makes sense. This is pure speculation, but keeping an eye on the deeply discounted company couldn't hurt. Printer companies such as Xerox, Brother, Epson, etc. may also get into 3D printing. The main thing with 3D printers now seems to be price.
If companies such as Hewlett-Packard could manage to create a 3D printer of consumer grade (with reasonable consumer prices in mind), widespread adoption of 3D printing would explode. The majority of 3D printers cost thousands of dollars, so mainstream adoption amongst average consumers on a wide scale is unlikely in the short term. 3D printing is expensive, and copy shops may see a resurgence as long as the printers remain pricey.
Staples (NASDAQ: SPLS) sees this opportunity, offering its "Staples Easy 3D" service, which will help make 3D printing more mainstream. The copiers will apparently also allow photo-realistic coloring. The launch by Staples will first occur in Belgium and the Netherlands in the first quarter of 2013.
3D printing is slowly seeping into the mainstream and attracting the attention of the masses. The technology is still too expensive for the average consumer, and will most likely first see adoption in the industrial workplace or possibly even stores and copy shops that will provide it as a service. Companies that produce printers would be wise to move into the 3D printing market, bringing cheaper models for the average consumer. Imagine if everyone had a 3D printer at home.
The Bottom Line
As of now, the only true way to invest in 3D printing is with the pure 3D printing plays, such as Stratasys and 3D systems, which trade at P/E ratios that demand tremendous growth with lasting sustainability. As a long-term investor, it may be wise to wait for the technology to gain some more mainstream momentum and traction, which should provide more investment opportunities and ways to get exposure as the market for 3D printing expands and more players enter. Valuations on 3D printer stocks are extremely high, and to buy them now would be more of a speculative play with a better-than-average amount of potential.
For those willing to take on more risk, 3D printing stocks such as Stratasys could end up paying off big time. A good question to ask oneself before investing, however, is whether or not the current 3D printing firms will be able to retain their moat going forward into the future, or if other companies with deeper pockets will come in and dominate once 3D printing sees significantly more popularity and demand from the average consumer. Either way, it seems 3D printing has a very bright future; now it's just a matter of deciding how to approach this future from an investment perspective while the technology is still in its earlier stages of adoption.
Jharry1 owns shares of Ford. The Motley Fool owns shares of 3D Systems, Ford, Staples, and Stratasys and has the following options: short JAN 2014 $55.00 calls on 3D Systems and short JAN 2014 $30.00 puts on 3D Systems. Motley Fool newsletter services recommend 3D Systems, Ford, and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!