Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Bitcoin Price Rises Higher Than Gold… But Its Value Is a Different Story - 30th Mar 17
Critical Fibonacci Extensions May Mark End Of Trump Stock Market Rally - 29th Mar 17
Ending Syria’s Nightmare will Take Pressure From Below - 29th Mar 17
Charts That Reveal US Real Employment Status and It’s Not Good - 29th Mar 17
SNP Controlled Scottish Parliament Demands Right for Scotland to Commit Suicide - Indyref2 - 29th Mar 17
USD Gold Myriad of Signs - 28th Mar 17
Ominous Social Trends That Will Shape Our Future - 28th Mar 17
Foundation And Empire: Is Donald Trump The Mule? - 28th Mar 17
Top Ten US Dollar Risks - 27th Mar 17
The Popularity of Gambling and Investing Amongst Students - 27th Mar 17
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

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