Best of the Week
Most Popular
1.Independent Scotland Will Disintegrate as Unionist Regions Demand Referendum's to Rejoin UK - Nadeem_Walayat
2.Bank of England Panic! Scottish Independence Bank Run Already Underway! - Nadeem_Walayat
3.Scottish Independence Referendum Result NO 55%, YES 45% - Vote Forecast - Nadeem_Walayat
4.Scotland Independence Result NO Win 55% to Yes on 45% - Nadeem_Walayat
5.US Dollar Forecast to Go Much Higher - David_Petch
6.Russian Union Of Engineers Accuses Ukraine Airforce In MH17 Crash - Raul_I_Meijer
7.The Emergence of the US Petro-Dollar - Gary_Dorsch
8.Don't Miss This Gold Buying Opportunity - Brien Lundinr
9.Silver Price: A Collapse and a Rally - DeviantInvesto
10.Silver Buyers Keep Stacking And Demand Higher Despite Falling Prices - 18th Sept 14 - GoldCore
Last 5 days
Home Healthcare Cuts Threaten 500,000 Jobs and Female-Owned Businesses - 23rd Sept 14
Silver, Gold, Debt and Taxes - 23rd Sept 14
A Post-Petrodollar Play for Triple-Digit Gains - 23rd Sept 14
Regime Uncertainty Weighs on U.S. Economic Growth - 23rd Sept 14
Bread, Circuses and Bombs - Decline of The American Empire - 23rd Sept 14
Has The Gold Price Drop Run Its Course? - 23rd Sept 14
Stocks Rally Following Janet Yellen's Conference and Scotland's Historic Referendum Result - 23rd Sept 14
Why Isn’t U.S. Housing Market A Bubble? - 23rd Sept 14
The Macro View and the Stock Market - 23rd Sept 14
Gold, the Fed and the Looming Stock Market Correction Q&A - 23rd Sept 14
Can Gold Act as a Safe Haven Again? - 23rd Sept 14
Tesco Super Market Giant Fast Disappearing Down a Financial Black Hole - 22nd Sept 14
Where China and Japan Are Investing Billions - 22nd Sept 14
Scotland YES 71% - Global Youth Intifada Moves On - 22nd Sept 14
U.S. Dollar: The Last Hurrah? - 22nd Sept 14
China Moves To Dominate Gold Market With Physical Exchange - 22nd Sept 14
One Giant Cluster Ponzi - 22nd Sept 14
The Millenial Cult Of Global Warming - 22nd Sept 14
Dubai Residential is NOT a Property Bubble But the Party’s Over - 22nd Sept 14
Stock Market Topping Process Update - 22nd Sept 14
Indian Stock Market BSE SENSEX The Encore Rally - 21st Sept 14
ISIS Fear-Mongering Ahead of Another US False Flag? - 21st Sept 14
Ecology Politics And Haeckel's Tree Of Meaning - 21st Sept 14
ASX200 Stock Market Index Set For New Highs - 21st Sept 14
Scottish Referendum Not Avoiding The Future - 21st Sept 14
Five Lessons Learned from the Scottish Referendum - 21st Sept 14
The Problem With UKIP And Other I I P's - 21st Sept 14
Stocks Bull Market Resumes - 20th Sept 14
Gold And Silver - Current Price Is The Story - 20th Sept 14
Can the U.S. Economy Withstand Another Housing Market Breakdown? - 20th Sept 14
Nervous Investors Will Hate the Money You Make With This Strategy - 20th Sept 14
Cheap Gold Stocks Upleg Intact - 20th Sept 14
Monetary Policy Killing The System - 20th Sept 14
Scotland and the Spirit of Our Time - 20th Sept 14
Bitcoin Price Charts In-Depth Analysis - 19th Sept 14
Alibaba is Focused, Will Use Money in Emerging Areas - 19th Sept 14
Bird's Eye View of the Gold Stocks - 19th Sept 14
Scotland Independence Result NO Win 55% to Yes on 45% - 18th Sept 14
Silver Price: A Collapse and a Rally - 18th Sept 14
Here's Why Trendlines are Your New Trading Best Friend - 18th Sept 14
Silver Buyers Keep Stacking And Demand Higher Despite Falling Prices - 18th Sept 14
The "Hidden" Billions in the Alibaba IPO - 18th Sept 14
Russian Union Of Engineers Accuses Ukraine Airforce In MH17 Crash - 18th Sept 14
Monetary Policy Weighs on Gold and Silver - 18th Sept 14
Global Currencies Analysis...The World According to Chartology - 18th Sept 14
Gold Price Hammered by Strong U.S. Dollar - 18th Sept 14
Is Citigroup the Dumbest Bank Ever? - 18th Sept 14
Scotland Must Vote Yes! For All Of Us - 18th Sept 14
Scottish Independence Referendum Result NO 55%, YES 45% - Vote Forecast - 18th Sept 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

You've never seen this before and may never again

Is it Too Late to Invest in 3D Printing?

Companies / 3d Printing Mar 21, 2013 - 09:53 AM GMT

By: Investment_U

Companies

David Eller writes: It’s rare these days to get in on the ground floor level of an investable trend in technology.

It seems like most of the big technological leaps have already taken place. Whether it’s something as dramatic as a smartphone or as subtly useful as paid search, these huge ideas don’t come around often.

That said, 3D printing may be the next game changer in technology. The industry has been around for a while and the stocks had a great run in 2012.


But we’ve seen a pullback since the Consumer Electronics Show in January, which coincided with the peak. I’m excited about the industry for three reasons:

•The possible emergence of the dental market.
•Falling prices for “prosumer” printers.
•Recent acquisitions offering padding to the upcoming quarter. Additionally, now that we’ve had a pullback, forward valuations for the two premier companies are reasonable.

A Quick Overview
Printing in three dimensions is essentially just layering material. A printer deposits a layer of plastic 28 microns thick (about a third the thickness of a human hair) in the shape of an object’s silhouette, and then adds additional layers until a custom part is formed.

The business case for this today lies in the hands of enabling industrial engineers to do three things:

•Develop proofs of concepts.
•Create prototypes.
•Build production parts.

It’s simply much cheaper, faster and more accurate to print your own part than it is to build a sand-cast model and have it sent out for fabrication.

Any design, production, or engineering company would be a potential customer today. NASA, for instance, used 3D prototyping for 60 to 80 parts on its new lunar rover. These are not necessarily final parts, but a plastic part will initially be printed up in a few hours, tested and modified before eventually being fabricated using the perfect materials. In some cases, clients will even use these parts in production. Diebold (NYSE: DBD) has used fabricated parts in production testing versions of their ATMs.

Whether it’s a plastic casting of the next version of Citi Field or a door handle on the next BMW (OTC: BAMXY), it’s cheaper and faster to build internally using 3D printing.

There’s Still Plenty of Room to Grow
Today, there are 40 million active licenses of Computer Aided Design software, but only 50,000 3D printers in production. There will never be a 1:1 comparison. However, if it could be 50:1, the opportunity is 16 times larger than the current market size.

Future verticals offer new opportunities that aren’t in analysts’ models. Without getting too far ahead of ourselves, consider the dental market.

Imagine going to the dentist with a broken tooth. The technology is becoming available right now to print a ceramic crown – inside the dental practice. This would save days, if not weeks, of walking around with a temporary filling. From the perspective of the industrial 3D printers, the only difference is the base material used for fabrication.

Stratasys (Nasdaq: SSYS) is the leading industrial vendor. The company developed a name for itself using a technology called Fused Deposition Modeling (FDM).

FDM allows clients to produce parts that are closest to production materials in terms of strength, flexibility and weather resistance. By taking the lead in materials, Stratasys has built a tier-one customer list including Bell Helicopter, Ducati, Dana Holding Corporation (NYSE: DAN), Piper Aircraft and Medtronic (NYSE: MDT).

Building on its lead in materials, Stratasys recently merged with Objet, which is developing the first multi-material printing solution. Investment positives for Stratasys include a top-notch customer list, expertise in a wide variety of materials and expansion into the dental industry.

3D Systems Corp. (NYSE: DDD) has an edge in design and distribution. The company has more patents than employees with 1,200 filed. Plus it offers full-color printing capability. The ability to manipulate color should give DDD a significant edge in the home market, as well as the lowest price point at $1,300.

From an investment standpoint though, I like SSYS better. The problem with DDD, as I see it, is the increasing competition for the consumer market. Also, the CEO recently sold 500,000 shares. That was more than half of his holdings. Although there are many harmless reasons insiders sell stock, so many shares could be a warning sign.

The Razor/Blade Model
After numerous recent acquisitions, the two companies look alike in terms of revenue and market cap. But as the market develops, there will be an important profit shift from machines to consumables. Each company is selling the consumable materials used in the printers, which could represent the greater of the profit opportunities. It’s similar to the razor/blade model.

It’s early and there’s no clear winner quite yet. But I believe Stratasys will be able to scale down to the consumer market in time.



* growth rates are not meaningful since both are digesting large acquisitions

Both stocks were high flyers, but pulled back after year’s end. Stratasys dropped 22% from its $90 peak while 3D Systems fell 27% from its high near $46.50.

From a valuation perspective, neither stock is very expensive if you trust consensus earnings estimates for 2013. Stratasys, however, recently released a printer specifically designed for the small-office dental market and simply continues to execute on its core opportunities.

It would normally make sense to simply buy a half position in both companies and let the industry sort it out. However, the recent management share sale at 3D Systems makes me want to take a wait-and-see approach for now.

Source: http://www.investmentu.com/2013/March/ssys-vs.-ddd-is-it-too-late-to-invest-in-3d-printing.html

Good Investing,

by ,

http://www.investmentu.com

Copyright © 1999 - 2012 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014