Do 3D Printing Stocks Deserve Another Look?

Matthew Carr By Matthew Carr
Emerging Trends Strategist

Market Trends

It seems like only yesterday that 3D printing stocks were all the rage.

Additive manufacturing (AM) was hailed as the future. And an entire new industry materialized practically overnight.

You couldn’t pick up a financial paper, open an email, take a seat at an investment conference or wade into the wilds of the internet without being bombarded by how awesome 3D printing was and was going to be.

Not surprisingly, shares of AM stocks like 3D Systems (NYSE: DDD), ExOne (Nasdaq: XONE), Stratasys (Nasdaq: SSYS) and voxeljet (NYSE: VJET) skyrocketed…

From January 2010 to the end of 2013, the worst performer was Stratasys. It managed to gain only a paltry 636%. That was abysmal compared with the more than 2,000% gains the other three posted during those high-flying days, according to Yahoo Finance.

The predictions were for 3D printing to reach industrial levels – where whole plants would close and be replaced. There would be 3D printing shops in malls so consumers could pick up customized products on the spot. There’d be 3D printed food and 3D printed medical devices that would save lives. And heated debates would erupt over file-sharing and ownership rights to designs.

Those didn’t seem like outlandish visions at the time. And still don’t, as some of these predictions have come true.

The Great Crash of 2014

But since those glory days, AM stocks have fallen on tough times…

All of the companies in the chart above have lost more than 80% of the value investors once coveted at their peaks.

It’s still hard to believe that Stratasys once traded for $130. Today, it’s worth just $22, according to Yahoo Finance.

Meanwhile, 3D Systems has tumbled from $90 to a mere $13.50. ExOne and voxeljet are trading below $8 a share, according to Yahoo Finance.

A harsh reality fell upon the AM world: 3D printers are not for the average consumer.

Modern 3D printers are slow. The process is time-consuming and multifaceted. You need spools of filament, but they’re not universal. And even though anyone can pick up a printer on Amazon for $350 or less, why would they?

Consumers simply don’t want to waste hours of their lives – not including the time required to learn the programs to create something original – just to make plastic trinkets.

3D printers aren’t made for mass consumption. The average consumer is never going to dedicate so much time for such a little payoff.

Sure, the headlines are screaming about 3D printed guns. But as with anything else, that’s easier said than done.

And that puts a cap on their potential… at least for now.

A New Wave of 3D Printed Guns?

Don’t go thinking AM stocks are dead.

Like their visions of the future, shares might have been ahead of their time.

For instance, let’s peek at Stratasys’ quarterly revenue…

There’s been a decline since 2014, but not one worth an 80% drop in share price. Though its share price was arguably overinflated.

Still, Stratasys’ business is starting to heat back up. In fact, shares of Stratasys jumped on second quarter results when revenue came in flat… but wasn’t down. And the company reiterated full-year guidance as it started to see a recovery in its high-end systems sales to the aerospace, automotive and government sectors.

We can also see the company heading into a strong period for sales.

Meanwhile, there’s potential for the AM business to boom. And it does have to do with guns… but not the ones you might think.

In May, defense contractor Huntington Ingalls Industries’ (NYSE: HII) shipbuilding division announced a deal with 3D Systems for a ProX DMP 320 3D printer. This is to produce metal replacement parts for castings, valves, housings and brackets for future nuclear-powered submarines.

One study projected the military AM market could reach $4.59 billion by 2025. Though that might be a little conservative.

Last year, Congress passed a defense budget that included increased military spending to $13.2 billion on AM technologies. Now, that’s a fraction of the more than $639 billion budgeted for the military in 2018.

But it’s more than the $12 billion that the global AM market is worth right now. And it’s projected to grow to $20 billion by 2021.

Large-scale AM may still be ahead of its time. And widespread consumer adoption is unlikely until it can be made easier and faster.

But AM stocks aren’t as overvalued as they used to be… In fact, some might be deserving of a second look. Especially as 3D printers could potentially head to the front lines.

Good investing,

Matthew