As 3D printing further expands into consumer and industrial markets, which companies justify the buzz and what lies ahead for this growing tech sector?
The expression “minding your p’s and q’s” – meaning to mind your manners – comes from early (2-dimensional) printing presses. Letters were hand-set in the presses and the two lower-case letters – p and q – were easily reversed.
When it comes to discussions of 3D printing, pundits have hardly minded their p’s and q’s. From biotech to manufacturing to home hobbies, stories about 3D printing have been nearly ubiquitous lately. Which companies in the space may justify the buzz and which may have been rushed into print?
MakerBot – Additive Interest in 3D Printing
One company in particular has been receiving a disproportionate share of the buzz: Brooklyn, NY-based MakerBot. MakerBot makes desktop, easy-to-use 3D printers for the consumer market. If you haven’t one of these printers in action, I recommend checking out this two-minute demonstration:
I wanted to get a feel for how the company has been trending over time. In the DataFox company profile for Makerbot I was able to see the Google search volume for the company:
As expected, a lot of recent buzz. What I didn’t know – pointed out by DataFox – is that MakerBot had been acquired by a company called Stratasys in late 2013.
Makerbot Finance Score
I don’t know anything about Stratasys, but according to a company overview on DataFox, the company is a “maker of additive manufacturing machines for prototyping and producing plastic parts.” It’s also a public company with a pretty substantial market cap. At $6 billion, Stratasys is already more than 10% the market cap of 2D printing leader, HP. On only $100+ million in Q4 2013 sales.
Stratasys Finance Score
What else is new with the company?
Q4 was a strong one for Stratasys, which just beat consensus revenue and earnings forecasts. Apparently most of those sales come from industrial applications, but MakerBot is a play in the consumer space. According to a Forbes article around the time of the purchase, “The MakerBot acquisition is part of a multi-pronged strategy to enter the consumer and small business space.”
Stratasys is not forgetting its industrial base, though. The company just acquired Solid Concepts and Harvest Technologies, two companies for outsourced printing of prototypes and customized parts. Per an April 2, 2014 Gigaom article, these businesses should help to augment RedEye, Stratasys’s on-demand printing service for industrial customers.
Exploring the 3D Space
What else is going on in the world of 3D printing? I added a few companies to a “Stratasys comps” list on DataFox (login to view full watchlist).
It’s an interesting collection. All six companies listed here are pure-play 3D printing companies, but they are certainly not the same. 3D Systems effectively invented the industry, while Organovo focuses on printing tissue for medical applications. The news list tailored to this set of companies links to a Gartner report forecasting 3D printing will be worth nearly $6 billion by 2017, up from $288 million in 2012.
According to Pete Basiliere, research director at Gartner, “The 3D printer market has reached an inflection point.” Gartner anticipates near-term expansion in both consumer spending ($133 million in 2014) and enterprise spending ($536 in 2014), especially as technology improves and prices come down. Perhaps more importantly, the company anticipates a shift in industrial applications from prototyping and one-off applications to more widespread use across industries.
The future for the 3D printing industry looks bright. How have these companies’ shares performed?
As expected, several of these companies have outperformed over the last year, though it looks like there may have been a slight correction recently. Does that mean these stocks are still over- or underpriced? See the above view on Google Finance.
A Soft Spot for Software
What is easier to tell is that they have been highly volatile over the past year. What if I want exposure to the industry without the risk of the 3D printing pure plays, or don’t want to bet on consumer or industrial or medical applications? Another article mentioned the software side of the business, including companies such as Autodesk. After all, 3D printing is not only about the hardware; software is critical to the industry as well. With that thought in mind, here’s my new 3D printing software list on DataFox (login to view full watchlist).
Software is likely to play a prominent role in the growth of 3D printing, and these stocks provide exposure while remaining diversified in other areas. Further, the space could get very interesting once HP jumps in with both feet – its plan is expected to be outlined by October. Or, another large industrial company (e.g., GE) could get much more involved.
Acquisitions Taking Shape?
There has been a lot of consolidation in the space over the past few years. 3D Systems, for instance, has made dozens of acquisitions in the last 3+ years. Could we see any takeovers of companies on the Stratasys comps list? And are there any other smaller acquisition targets out there for any of these companies?
Andreessen Horowitz-backed Shapeways is first on DataFox’s list of private 3D printing companies. According to a TechCrunch link I found through DataFox, the company has raised nearly $50 million and is the largest 3D marketplace. Shapeways could be an interesting target for any consumer-focused 3D printing company.
My Take (Worth the Paper It’s Printed On?)
The real opportunity in 3D printing is on the industrial, not the consumer side. Though I expect growth of inexpensive 3D printers for the home, the near-term market is limited. As technology improves and costs drop, we will see a real shift toward 3D printing in industrial manufacturing applications. Considering manufacturing is a multi-trillion dollar industry, the market will not be a small one. There’s a much greater opportunity with industrial pure plays such as 3D Systems or with the software providers.
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Investment Advice Disclaimer
The information contained in this post, while intended to interest investors, does not constitute investing advice or services. Future trends and predictions contained herein are derived from industry news and public information. These “forward looking-statements” are speculative, subject to risks and uncertainties, and are not guaranteed. Actual results may vary. Potential investing decisions should be made by consulting a professional legal, tax, investing or accounting professional, where risks and suitability can be throughly evaluated. DataFox makes no obligation to update or revise any of the statements contained herein.