Best of the Week
Most Popular
1.The Trump Reset, US Empire's Coming Economic, Cyber and Military War With China (2/2) - Nadeem_Walayat
2.Now Is the Time to Buy Gold - 5th Jan 17 - John Grandits
3.CIA Planning Rogue President Donald Trump Assassination? Elites "Manchurian Candidate" Plan B - Nadeem_Walayat
4.The Trump Reset - Regime Change, Russia the Over Hyped Fake News SuperPower (Part1) - Nadeem_Walayat
5.Most Popular Financial Markets Analysis of 2016 - Stock Market Crash Postponed Again - Nadeem_Walayat
6.No UK House Prices Brexit Crash 2016 Despite London Weakness, Forecast 2017 - Nadeem_Walayat
7.President Trump Understands the NSA, CIA... LIE, America's Intelligence Agencies Crime Syndicate! -Nadeem_Walayat
8.President Donald Trump's 2017 New Year Message, BBC Fake News, Was 2016 a Dream? - Nadeem_Walayat
9.Major Stocks Bear Market Still Looms - Zeal_LLC
10.Biased 2017 Forecasts - Debt, Housing and Stock Market (1/2) - James_Quinn
Last 7 days
The New Gold Rush Of 2017! - 23rd Jan 17
HBO HOMELAND Bet on HIllary Clinton Winning US Election and LOST - 23rd Jan 17
Stock Market New Highs For 2017? Yes, But When Do I Enter? - 22nd Jan 17
Active vs Passive Investing: And the Winner Is ... - 22nd Jan 17
The Epidemic of Bad Ideas - 22nd Jan 17
Gold Futures Prices Looking Bullish - 22nd Jan 17
Time for Crude Oil Price Drop below $50? - 21st Jan 17
AI and Robotics - We Are All Low-Skilled Workers Now - 21st Jan 17
The Trump RESET Starts on US Presidential Inauguration Day 2017 - What to Expect - 20th Jan 17
Will the CIA Assassinate Rogue President Donald Trump Like JFK? - 19th Jan 17
Bonds, Dollar, Stocks, Gold, Silver Major Markets at Turning Points - 19th Jan 17
Populism; the Danger? What About Debt? - 19th Jan 17
Gold Price 50-DMA Breakout - 19th Jan 17
Turkey, 'Axis of Gold' and End of US Dollar Hegemony - 19th Jan 17
The Most Important Market Chart on the Planet - 19th Jan 17
Trump Deficits Will Be Huge - 19th Jan 17
Stock Market Trading Patience Pays Off with CHK Using Momentum Reversals - 19th Jan 17
Gold - How to "Buy Low and Sell High" Like a Pro - 19th Jan 17
State of the Global Stock, Financial and Commodity Markets Report 2017 - 19th Jan 17
The Hunt for Russia's Next Enemy - 18th Jan 17
Returning Gold Bulls - 18th Jan 17
Biotech Breakthrough Could Create A $11.4 Trillion Opportunity - 18th Jan 17
Bitcoin and Gold - Outlook, Volatility and Safe Haven Diversification - 17th Jan 17
Stock Market Uptrend on Borrowed Time - 17th Jan 17
The One Stock to Retire On - 17th Jan 17
Trump anti-Communist Counter Revolution - 17th Jan 17
US Stock Market Update as the Trump Inauguration Approaches - 17th Jan 17
The American Crisis - Common Sense 2017 - 17th Jan 17
Obama Leaves, Hope Arrives, Will Stupid Stay? - 17th Jan 17
Damage Inflicted by Precious Metals Manipulation Is in the “Multi Billions” - Keith Neumeyer - 17th Jan 17
Gold Price Forecast 2017 Update - Video - 17th Jan 17
The Story of the U.S. Regime Change Plan in the Philippines - 16th Jan 17
Gold Price 2017 Trending Towards $1375 as Forecast - 16th Jan 17
'Deep State' CIA Director States We are Not NAZI's, Warns Trump Does Not Understand Russian Threat - 15th Jan 17
UK House Prices Forecast 2017 - Crash or Bull Market? - Video - 15th Jan 17
SPX Stocks Bull Market Update - 14th Jan 17
President Trump vs the Deep State that Hides in Plain Sight - 14th Jan 17
The Impact of Sir Alex Ferguson's Retirement on Man United's Share Price - 14th Jan 17

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

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

© 2005-2016 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

Catching a Falling Financial Knife