More Growth Ahead for 3D Printing Companies
Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
News about 3D printing technology has reached the mainstream in recent months and sent share prices soaring. Let's review some of the most notable news and try to predict where these stocks will go in years ahead.
3D Systems (NYSE: DDD), Stratasys (NASDAQ: SSYS) and Exone (NASDAQ: XONE) are three of the biggest 3D printing manufacturers. All have experienced substantial growth in their profits and share price appreciation over the past year (Exone's IPO was in February and the stock has already increased by about 170%).
The market has treated all three stocks with both skepticism and optimism, but those invested in 3D printing likely have different feelings about these stocks than they did at this time last year. That's because 3D printing is now a topic of mainstream conversation, and what were once hidden gems are now the topic of conversation at coffee shops.
But all that talk has increased the price well beyond what many consider to be actual value. However, as a long-term investor, I see this industry being as popular as computers and TVs. A printer will be in most North American households 15 years from now. I still see 3D Systems as being undervalued considering the slew of acquisitions it has made and its competitive position in the household printer market. Stratasys looks fairly valued, but it is still unknown if the firm can manage to produce a 3D printer for the household. ExOne has increased in price too quickly, and looks overpriced and poised for a pullback, due to the narrow focus of its business compared to 3D Systems, which is heavily diversified.
What does all this mean to those invested in 3D printing? It likely means that while there is still skepticism about the stocks, increased attention usually means more buyers. And that is exactly what has happened now that the media have started to focused on major announcements in the industry.
Checking the headlines
Two major stories over the last several months about 3D market progress have driven prices to a point where they will likely level out, before surging when earnings are released. The development of a 3D printed gun made headlines throughout the mainstream media. (Read the story here.) The gun was the first time many people became aware that a device capable of printing functional objects in 3D was even possible. Something as seemingly space-aged as 3D printing is sure to spark interest among the general public. Add to that the controversy surrounding guns -- and particularly the concern over the viability of being able to print whatever one sees fit -- and you've got the attention of a lot of people.
Staples announced in May its intent to add 3D Systems' Cube, which has given a new level of credibility to 3D printing. (Read the story here.) It appears the future is now. The printer costs $1,300, and as production costs decrease after anticipated advancements in the technology, it will become more affordable for the average person to own a 3D printer. While 3D Systems is Staples' chosen printer provider, Stratasys and Exone could be next to sell at a retailer.
Which 3D printing company stacks up?
With 3D Systems making the major move into the mass consumer market, it looks to be the stock to own. I am fairly certain that at least one of these companies is going to turn into a 20-bagger from its current price, and 3D Systems is leading the race. With the price tag of a Stratasys printer at $9,900, it could be a while before the company develops equipment suitable for the average family. New kid on the block, Exone, hasn't come close to developing anything similar to what would be offered at a retail outlet. For example, the machines the company manufactures for automakers, aerospace, and heavy-equipment industries cost as much as $1.4 million each, and the firm doesn't have a hold on an affordable version for everyday printing needs.
Stratasys needs to secure a distribution contract similar to 3D Systems. However, before that can happen, it needs a more affordable product. Companies like Staples aren't likely to carry a printer selling for $9,900. Unlike Exone, the company does offer desktop printers, but 3D Systems looks to be ahead of the game with their relatively affordable Cube.
Exone sells its products at a limited number of Production Service Centers located in the U.S., Germany, and Japan, which makes the company's exposure to potential buyers puny in comparison to the exposure 3D Systems is getting through Staples. However, with industrial and aerospace companies able to afford the multi-million-dollar printers this company provides, the niche market could facilitate huge profits.
What will happen next?
Many investors who bought shares of 3D printing companies over a year ago did so because they knew the market was relatively unknown. Now that the mainstream has potentially caught on to 3D stocks -- and with the S&P 500 adding 3D Systems to the Midcap 400 Index on May 8 - the secret is out. After the initial recent buying frenzy following amplified media attention and then the more recent tapering off period, the months ahead appear to be a time for the prices of these top 3D stocks to take off -- especially after seeing the potential profits at 3D Systems from sales at Staples. Expect more big gains in the months ahead as the word spreads about the viability of 3D printing.
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Phillip Woolgar owns shares of 3D Systems. The Motley Fool recommends 3D Systems, Stratasys, and The ExOne Company. The Motley Fool owns shares of 3D Systems and Stratasys and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 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!