3 Reasons to Be Bullish on 3-D Printing in 2014
If you’ve been with us long enough, you know the 3-D printing story.
50,000 years ago, you made a knife by banging rock on flint, chipping away at the thing until it was the right shape, good, and sharp.
That’s “subtractive manufacturing”, and it’s how we’ve been making things for most of history.
Over the past 30 years, however, engineers and technologists have taken a different approach:
…one initiative… aims to put 3-D printers in each of America’s roughly 100,000 public schools.
Start with the smallest ingredients, add successive layers, until… viola! You get a whole object.
That’s additive manufacturing — also known as 3-D printing. But only recently has 3-D printing crossed the line into cost-efficiency, wiggling itself into the mainstream.
The profit potential has been astounding — showing double and triple digit gains in the past year from some of the companies we’ll discuss today.
We’ll also answer the question: is the ride over? Let’s find out…
In the past 10 years, the Patent and Trademark Office has registered over 6,800 3-D-printing patents. That’s one strong indicator in a reliable stock screening method we’ve used on the 3-D printing market. It’s called “CAN-SLIM”.
No wonder 3-D printing tech was one of the hottest sectors of 2013. Forbes said, “3-D printing will change absolutely everything it touches”. And so it has: consumer products, industrial and medical, electronics, aerospace and much more.
Future disruption has government and education locked in its crosshairs.
In fact, one initiative by MakerBot aims to put 3-D printers in each of America’s roughly 100,000 public schools. Kids should be familiar with them by now, since McDonald’s plans to add 3-D printing capability to its restaurants for Happy Meal toy customization.
Already, Staples, UPS and Microsoft have 3-D printers popping up in their stores. Leading research firm Gartner predicts that by 2015, seven of the 50 largest multinational retailers will carry 3-D printers. And too many stores to name here exist online.
The variety is incredible.
Printers range from $100 machines that make action figures, spare parts or edible candies…
$2,000 machines that are making personalized sex toys, circuit boards or life-changing prosthetics…
$250,000 machines that make high quality metal guns…
$500,000 printers can make anything from first-class artwork to even entire buildings – I’m serious.
We’ve been calling this “the maker miracle” because it includes more than just printers. A diverse ecosystem of software, hardware, 3-D scanning, and “smart materials”, among other technologies, are converging and complimenting each other to make a Maker Movement.
Yes, dear reader, the evidence suggests our long-term thesis remains intact: 3-D printing is now a movement that’s in for the long-haul. But with such an incredible year in 2013, and a volatile past couple of months… what is an investor to do right now?
Let’s take a closer look…
One month ago almost to the day, we brought in our in-house technical trader (and Rude Awakening managing editor) Greg Guenthner (AKA Gunner) for a fresh perspective on the all-out tug-of-war with 3-D printing trading activity. This is what he said:
“The secret to buying and selling these stocks at the right time lies in understanding the cycles of hype, hysteria and the debilitating emotions of the investing herd.
“3D printing stocks are the perfect example. And right now, it appears that expectations for the fledgling consumer 3D printing market are soaring toward outrageous levels…
“It’s this remarkable story, re-cast and re-told by the media that has led us to where we are today – the peak of the hype cycle. You’ve seen this hype cycle play out before. The Internet was the technology trigger for the rise of the dot-com stocks in the 90s.
“After rampant speculation, expectations peaked and the shares started dropping. Disillusionment set in, followed by the best Internet businesses starting to stand out from the crowd. Realistic expectations began to emerge — and the standout businesses thrived.”
“How long the complete cycle takes to play out varies, of course,” he concluded. So the question is: when will the best 3-D printing companies start to “stand out from the crowd”? Is the hype over or not? What can be realistically expected?
Gunner picked “the big three” companies as examples, and we’d best refer back to them today.
Those companies consist of the two titans, Stratasys (NASDAQ: SSYS) and 3-D Systems (NYSE: DDD). Third is ExOne (NASDAQ: XONE), or what we affectionately call “the little industrial 3-d printing company that could”.
“The big three” started to get into trouble when some of them missed their projected goals.
Stratasys forecast that its full-year earnings would miss Wall Street estimates… and its stock took a tumble. At the same time, ExOne slashed its revenue guidance. And down it went.
As far as I can tell, 3D Systems (NYSE: DDD) and other companies such as Voxeljet AG (NYSE: VJET), a comparatively recent IPO in the space went down because the prior two took a hit.
That means the long-term 3-D printing bull should treat these recent dips as decent entry points, now that the stocks are creeping back up.
In other words, the correction should be over.
In my opinion, of “the big three”, the one that’s most interesting is ExOne. It’s a smaller company, and therefore better suited for the more risk-tolerant, high-growth investor.
Here’s why ExOne interests me…
First, XONE’s stock selloff seems overblown, since the company’s lower revenue projection is connected to the timing of their sales — not demand for their machines.
Second, ExOne specializes in low-volume, high quality machines with very high price tags. That makes this next part extra interesting…
ExOne assured investors that the timing of their recent sales would go through but they wouln’t be booked until 2014. In other words, their revenue forecast, which beat up their stock price, was due to delays in some of their deals overseas. They had revenue, it just wasn’t logged. This means that their added sales should show next period. Plus, getting market demand from abroad is a good sign. In October 2013, they began construction of a new $20 million, fully-equipped facility in Germany (to be completed in late 2014).
So of the “big three”, ExOne seems like the highest growth stock at the moment. And that’s something to be excited about.
Many speculative rallies in biotech and nanotech have failed to pan out. Will 3-D printing be the same? Of course, it’s impossible to know. But three big forces make the future of 3-D printing look promising.
The first is the expiration of key patents that is happening right about now. I’ve touched on the expiration of key patents before and how that could be very good for the 3-D printing ecosystem — spurring what could be referred to as a sort of “hyper capitalism” throughout the very active and involved DIY community.
The second force is that ecosystem’s complementary technologies. 3-D scanning, for example, is really taking off. This allows users to skip the conceptualization phase (designing something on a computer) and going right to 3-D print. It’s the equivalent of photocopying… but for objects.
Intuitive software and the increased use of advanced materials such as metals and “smart ink” will bring 3-D printing to yet another level…
The third force is a bit of a wild card: crowdfunded 3-D printing projects. Now on the surface, I think that most crowdfunded 3-D printing projects will fail, and the successes will most likely be swept up into “the big three’s” ongoing acquisition binges.
However, there’s one thing that crowdfunding is likely to achieve: “the killer app”.
The earlier buyers of 3D printers will likely continue to be dominated by makers and hobbyists who will contribute to the development of a 3D printing “killer app” that will be a key driver of sales in the future. “We expect that a compelling consumer application — something that can only be created at home on a 3D printer — will hit the scene by 2016,” says Pete Basiliere, research director at Gartner.
In this next round of 3-D printing growth, it’s important to be more selective than the past.
Tomorrow, we’ll check out a new player in this space that’s flying under the radar, as promised.
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