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Can 3D Printing Companies Print A Bright Future?

By  +Follow July 3, 2014 2:00AM
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3D printing stocks, 3d printing companies, small-cap stocks, hot stocks, tech stocks, growth stocks

Imagine a world that you can supply daily necessities like cups, toothbrushes, even food without stepping outside your home. As Jacob Harper puts it, it’s “a concept that seems straight out of a science fiction novel.” Doesn't it sound fantastic?

Well, 3D printers may allow you to live like this in the future. 3D printing, also known as additive manufacturing, is now on the crest of wave which myriads of investors believe will rocket stocks higher in the next decades.

Rapid Growth in 3D-Printing Industry

According to a report published by Wohlers Associates, a consulting firm focusing on new development and trends, the market for 3D printing in 2012 grew 28.60% to $2.204 billion. Growth of the low-cost (personal) 3D printer market segment averaged 346% per year from 2008 to 2011. Wohlers Associates predicts that the 3D printing industry should continue its strong double-digit growth over the next several years, leading to sales of 3D-printing products and services approaching $6 billion worldwide by 2017.

Much of the promise of 3D printing is that its products can be used in a variety of fields, including architecture, construction, industrial design, aerospace, biotech, and education. Several weeks ago, NASA announced that they would have a Made-in-Space 3D printer aboard the space station this August after a final test. It will help astronauts create custom tools precisely tailored to the use astronauts have for them them.

Organovo (ONVO) , a 3D bio-printing company, announced that it could print human liver tissue capable of sustaining function for up to 40 days in November 2013. Joel Anderson holds a positive attitude towards Organovo’s future. In fact, most 3D printing stocks were all the rage in 2013 — shares of Stratasys Ltd. (SSYS) gained approximately 73%, ExOne Co. (XONE) more than 100%, and 3D Systems (DDD) , one the largest 3D printing companies in the world, almost 173%.

Not All Market Watchers Hot on 3D-Printing Stocks

However, while many see incredible promise in a burgeoning young industry, some analysts consider the 3D printing industry to be a bubble as it’s still not profitable. After the brilliant increase in 2013, the performance of 3D printing stocks in the first half of 2014 has been disappointing, with 3D Systems decreasing approximately 37% and ExOne shares falling around 42%.

Some analysts think that the 3D printing industry is now in an early stage of its lifecycle, implying a volatile investment environment. They worry about the great threat from foreign rivals like Asian companies, who have cheaper products and can get support from their governments including tax breaks.

High Price for Entry Could Hold Back Industry Growth

Indeed, the price of 3D printer is one of the major reasons suspending its prevalence. Though it has been described as affordable by some, the price of around $1,500 for Amazon’s 3D printers, plus other supplementary equipment, is beyond a normal family’s budget. It’s still a long way before 3D printers become a household item and, at this point, stocks of 3D printing companies have to be viewed as long term investments.

Short Term Volatility for 3D-Printing Stocks, but Earnings Reports May Point Towards Long Term Growth

In the past six months, there were ups and downs among the four major 3D printing companies’ stocks. But the stocks’ recent changes imply a strong sign of rebounding. Stratasy released its financial results for Q1 of fiscal 2014 on May 9. According to the report, the company’s non-GAAP revenue in Q1 was $151.2 million, representing a 54% increase over the $98.2 million for Q1 of fiscal 2013. Given Stratasy’s acquisition of MakerBot Industries LLC, it seems clear the company plans to expand its marketing share.

“The rapid adoption of our higher-margin products and services remained impressive during the first quarter, which helped drive strong organic revenue growth of 33% during the period and contributed to a significant increase in our gross over last year,” said CEO David Reis. “In addition, MakerBot products revenue remained strong, and we continued to invest aggressively in sales, marketing and product development initiatives that we believe will drive incremental growth over the coming periods.”

3D Systems offers 3D systems software, scan-to-CAD, and other supporting services in addition to its 3D printers. The company published its financial results for Q1 of fiscal 2014 in April, stating that the demands of its products and services was led by a 76% unit sales growth of design and manufacturing 3D printers.

According to the results, revenues from the company’s major segments like 3D printers, print materials, and services were up to $179.2 million. 3D Systems also seeks to build strategic partnership with other makers of 3D printers to broaden and enhance its ecosystem, “extending the 3D printing digital thread across its entire portfolio from consumer to healthcare to industrial manufacturing.”

“Consistent with our expectations, expanding placement and utilization of our advanced design and manufacturing 3D printers has accelerated our materials’ revenue growth-rate,” said CEO Avi Reichental. “And we are pleased that our 3D printers growth continues to surpass all other product categories, despite the fact that the resulting mix delayed anticipated expansion of our gross profit margin.”

Some 3D-Printing Companies Struggling in 2014

Having focused on biotechnology via 3D printing, Organovo has an ambition to become a leader in creating human tissue. However, Organovo has to face its disappointing financial figures for fiscal 2014 first. The company released its financial results for fiscal 2014 on June 12, demonstrating a decrease of 67% in revenues.

According to the report, the revenues for the fiscal year 2014 that ended March 31, 2014 were $0.4 million, comparing that of $1.2 million for the year ended December 31, 2012. This drop reflects the completion of fewer than two collaborative research agreements since 2012, partially offset by increasing revenue contributions from three new collaborative research agreements. However, the company is still confident about their products.

“We demonstrated the viability and utility of our 3D liver tissues and breast tumor disease model, expanded our partnerships, uplisted our common stock to the NYSE MKT, raised significant financing, and saw tremendous scientific results from our bio-printing efforts in a variety of tissue types,” said CEO Keith Murphy. “We will continue to focus in fiscal 2015 on executing our business plan and on striving to deliver long-term shareholder value.”

Another 3D printing company, the ExOne, fell 4.07% to $43.13 per share on July 2. The company’s market cap is $622.88 million, with an average trading volume of 502,211. The stock has a 52-week high of $78.80, and a 52-week low of $24.34 per share.

According to the company’s financial report for Q1 of fiscal 2014, revenues from product line have an 8.22% decrease from $7.9 million to $7.3 million. But ExOne does not think that such quarter-quarter fluctuations can truly indicate the long-term trends. The company cited a long sales cycle and the significance of a machine’s average selling price relative to total revenue as reasons why fluctuations in machine revenue may vary greatly from quarter to quarter. Investors seem less disappointed with the results, though. Shares of ExOne had a slight rebound of 0.16% to $43.20 after the bell.

Future is Uncertain Until These Companies Start Printing Money

The overall marketing environment for 3D printing industry remains positive, and these companies clearly have faith in the long-term success. In order to rally from this early 2014 swoon, 3D printing companies also need to avoid risks, such as management issues and tangling product lines. After solving those problems, though, 3D printing companies should have solid growth and step into a bright future.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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By  +Follow July 3, 2014 2:00AM
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