Three-dimensional printing, or 3D as it is called, has revolutionized how many things are made and fabricated. As usual, young, upstart companies were the first to create, innovate and expand the technology to the point that it could be practical and commercialized. Now that it is, and there is a market, larger companies are becoming predatory and are ready to enter the field. A new report from Jefferies looks at how that may affect the current 3D printing market leaders.
The list of new entrants is growing, and it is growing fast. Jefferies cites Hewlett-Packard, Autodesk, Canon, Epson, Ricoh and a host of other companies as possible major impact players. The key for the current players is that Jefferies doesn’t see any of the new entrants making a difference for at least two years. The report cites the two current companies that can survive the competition onslaught, and perhaps ultimately get bought themselves.
3D Systems Corp. (NYSE: DDD) has been an incredibly volatile stock, and now may be a good time for investors to revisit. Its 3D printers convert data input from computer-aided design generated software format or 3D scanning and sculpting devices to printed parts. 3D printing was a super-hot segment last year, and the top stocks were absolutely eviscerated in the early spring sell-off, and again in October. Hot and fast money loves to be long and short this top stock, so entry points are critical. The Jefferies team feels that the company’s product line is strong enough, but that it will be forced to lower prices to remain competitive and stay in the race.
3D Systems shareholders are paid a small 0.8% dividend. Jefferies lowered its price target on the stock, which is rated Buy, from $46 to $42. The Thomson/First Call consensus price target is $46.30. 3D systems closed Wednesday at $34.91.
Stratasys Ltd. (NASDAQ: SSYS) is another top name in the 3D printing area that has also been red hot and very volatile over the past two years. In an effort to build up its Makerbot awareness, the company teamed up with eBay last year to utilize e-commerce to sell 3D printing services. Martha Stewart even wants to take 3D printing mainstream with MakerBot. The Jefferies report pointed out that 3D printing and services, although maturing fast, remain at an early phase of growth, and they like others on Wall Street have emphasized sales-based metrics over other valuation metrics. They also feel that the company can remain a significant player even when the bigger competition is in the game.
The Jefferies price target for the Buy-rated stock is $155. The consensus price objective is $133.71. The stock closed Wednesday at $103.21 a share.
The bottom line is the big boys are coming, with the variable being when rather than if. They see profit and a big future in the space, and they have the deep pockets to push their way in. The key for the early entrants is to keep top products and to stay price competitive. Either they survive or possibly are acquired. Either is better than getting shoved out of the market.
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