When Will 3D Printing Get Serious?
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I only recently discovered The Big Bang Theory, but was riveted when Raj and Howard blew $5,000 on a used 3D printer. Raj makes his own action figure, Malibu Koothrappali, and Howard makes one of himself and his bride, Bernadette.
Howard's wife explodes "Five thousand dollars for a couple of dolls?! Are you out of your mind?!" He replies," Not five thousand dollars for a couple of dolls, five thousand for as many dolls as we want!" There are some more choice bits I can't repeat, about other things, Howard can print out if he doesn't get his money back.
Just a toy story?
And that sums up what at home machines are being used for now...making toys. And making novelties isn't worth the price until many more materials aside from thermoplastic are available, and the design software less is challenging for small business and the home.
3D printing companies are disruptive game changers and investors will want the first movers. The public is still overwhelmingly unaware of the possibilities of 3D printing, although 3D printers are increasingly found in schools and colleges. With public awareness gradually growing, the big moves are happening now and the biggest players are Stratasys (NASDAQ: SSYS) and 3D Systems (NYSE: DDD). Another way to play it is with Autodesk (NASDAQ: ADSK), a maker of 3D printing software.
At-home machines don't cost $5,000 anymore, especially after Stratasys bought MakerBot, a desktop at home printer popular with "makers" (the preferred moniker to hobbyist) and a former threat to the publicly traded 3D companies. The MakerBot has the advantage over 3D Systems' at home printer the Cube of 25,000 (and growing) CAD designs available for free at Thingiverse.com, justifying MakerBot's higher cost of $2,200.
3D Systems' founder Chuck Hull patented stereolithography in 1986. 3D Systems attracts prestigious customers such as Porsche, Lockheed Martin, and Johnson Controls. In a recent coup for the company, 3D Systems' desktop 3D printer, the Cube, will be available at Staples and go for $1,300. But its cubify.com site doesn't have the breadth of designs that Thingiverse does.
3D Systems has a sky high trailing P/E of 109.52, but the stock price has soared just as high, up 84.75% over 52 weeks. Its short interest is also stratospheric at 32.50%. But, its growth potential is undeniable with analysts expecting five-year EPS growth per annum of 20.40%.
3D Systems shored up its 3D design side somewhat with its purchase of Geomagic, a 3D authoring solution provider, which closed this spring. This purchase was extremely important to keep widening the moat for 3D Systems and is supposed to be accretive within the first year of closing. This is just one of the 21 acquisitions the company has made in the last two years, prompting Brean Capital to initiate coverage on July 29 with a Buy and a $60 price target.
Stratasys' Founder and Chairman, Scott Crump, is credited as the inventor of Fused Deposition Modeling, and was inducted this last year into Industry Week’s Manufacturing Hall of Fame. Stratasys has over 500 patents and has the largest variety of 3D printing materials available. Important because it's not enough to have the machines, but also the widest variety of materials to keep expanding addressable markets. It has completed its merger with Israeli 3D company Objet.
Its most exciting applications are for military, aerospace, automotive, and medical. It has some important deals with Ford and NASA. It also partnered up with Autodesk and Kor EcoLogic to make the coolest car ever .
Stratasys has seen 30% plus growth since 2011 to total revenue of $359 million and EPS growth of 59% to $1.49 in 2012, and the company has guided for total revenue that is $90 million higher for 2013. It reports on Aug. 8.
The stock is up 41% over the last year and the short interest is much lower than 3D Systems' at 11.20%. It also has a large insider hold of 42%.
Stratasys is also the 3D printer of choice for UPS, which has started a trial program offering in-store use of a Stratasys uPrint SE Plus printer, a more professional printer than the at-home printer allowing for much more detailed and intricate printing applications.
The crux of the matter
Again, the crux of the matter is at-home printers aren't currently capable of the detail applications that would elevate their adoption to a ubiquitous household and small business position. Part and parcel of the 3D at-home dilemma is that the software to design a 3D printed item is so challenging. Solutions to this problem are coming from academia, the "maker" movement, and Autodesk, the pioneer in 3D software.
Autodesk is the oldest of these three 3D companies, founded in 1982. It competes with French company, Dassault Systems. Autodesk has a trailing P/E of 36.15 and a PEG of 1.35. The stock is virtually flat over the last year, not riding the volatile waves of other 3D stocks. (Example: 3D Systems sold off 10% after it recently reported disappointing earnings and Stratasys sold off in sympathy. 3D Systems sold off just as much after disappointing in January.) Autodesk reports on Aug. 22.
Although Autodesk's software products are primarily aimed at industrial and commercial uses, the company has been very supportive of the maker movement with its Autodesk University and an agreement to license some of its designs under a Creative Commons open network framework. Chris Bradshaw, Autodesk senior vice president said, "With Creative Commons, we are adopting an easy-to-follow legal infrastructure for the worldwide user community to effectively share knowledge."
Analysts give Autodesk a 13.25% five year EPS growth rate. Barclays initiated coverage of Autodesk in May with an Outperform. The median price target is $40.00.
So much more potential ahead
The 3D printing industry is just ramping up, especially the at-home printer, even if right now it's a "novelty" item. If you want a name that isn't overbought, buy Autodesk. For growth and market domination, buy Stratasys. For a company growing through acquisition, go with 3D Systems. But with more printing materials, easier-to-use software, and competitive pricing on the actual at-home printers coming, these three companies are poised to print money.
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AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool owns shares of 3D Systems and Stratasys and has the following options: short January 2014 $36 calls on 3D Systems and short January 2014 $20 puts on 3D Systems. 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!