Could This Be The Next Big Investment Opportunity?

After smartphones and PCs, 3-D printing is the latest buzz-inducing technological advancement. Initially, the technology had been used for designing prototypes, but it's now making parts for finished goods. Once the 3-D printing industry picks up the pace, it could become the perfect alternative to traditional manufacturing.

Plenty of potential
The industry won't just cater to corporate and business use; it also has a lot of opportunities in the consumer market. Also, CitiGroup recently upgraded the ratings of two major 3-D printing stocks to buy.

3D Systems  (NYSE: DDD  )

3D Systems, one of the leading stocks in the 3-D printing scene, has a market cap of over $5 billion and is currently trading around $51.90.

As you can see in the graph below, the company's share price has come a long way hitting the $50 mark in June. The stock has gained more than 66% since March, and I don't see the growth stopping anytime soon -- at least, not for the next couple of years.

Source: Yahoo! Finance.

3-D Systems has released several new products, including advanced 3-D printers and new software, which had an overall decent reception in the market. They helped to contribute to a more than 100% increase in the "printers and other products" revenue to $54.2 million in its most recent quarter. 

Key areas to focus on

3D Systems does seem like it's heading in the right direction -- but considering that it's still in its early phases, investors shouldn't solely rely on analysts' predictions. Firstly, you need to focus on how well the company can integrate the acquisitions it's made over the last two years, including Geomagic, Teamplatform, and Phenix Systems.

I'd also keep an eye on 3D Systems' performance in the consumer market, which is probably one of the major factors that will determine the company's direction. Closely watch the Cubify design website, along with sales of  the company's consumer Cube printers, to see how it's performing in this crucial segment.

Lastly, 3D systems must also focus on the professional market, which has always been the company's cash cow. The company's printers can now fabricate items not only in metals, but also in plastic.

Stratasys  (NASDAQ: SSYS  )  

Stratasys, like 3D Systems, has also come a long way after trading just over $60 in March. One of the factors contributing to the stock's recent rise is that more and more analysts have been covering the 3-D printing space, making investors aware of the opportunity that lies in the industry.

Source: Yahoo! Finance.

Stratasys may have a bit more potential than 3D Systems thanks to its acquisition of MakerBot, one of the first companies to produce affordable 3-D printers.

Since it opened in 2009, MakerBot has sold more than 22,000 printers. Its purchase could boost Stratasys's top line, since Makerbot is reportedly expecting $75 million in revenue this year, and booked $11.5 million in revenues for the latest quarter.

Key areas to watch
If you're considering an investment in Stratasys, focus on its performance after its acquisition of MakerBot. That deal not only helps the company eliminate relatively strong competition in the future, but also gives Stratasys a head start in the consumer market compared to 3D Systems.Watch revenue growth, and see whether the MakerBot purchase leads to profitable synergies for Stratasys.

While Stratasys's financial position is relatively solid, with reasonable levels of debt, an improving revenue stream and increasing gross margins would both mark positive developments for the company's future.

I believe that this particular industry is one of the best investment opportunities today. Both the technology and the industry around it still have a lot of room to grow. Even if some critics dismiss 3-D printing as a fad today, I think 3D Systems and Stratasys could both be great buys at the moment.

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  • Report this Comment On September 16, 2013, at 8:50 AM, analyze224 wrote:

    Appreciated your piece. There are critics, however, who do not "...dismiss 3-D printing as a fad today..."

    This technology has been in existence for decades, so it isn't altogether a fad. However, there do appear to be fad dynamics - hype and lack of vetting/ analysis applied to the prospects for 3D printing technology in a slew of areas.

    3D printing technology clearly will not be gone tomorrow, but that doesn't necessarily mean that it will be ubiquitous tomorrow or in ten years either.

    Specific to 3D Systems you reference the importance to the co's future of the success of its consumer lines. Early indications via tracking, Amazon, Office, etc, (number and nature of reviews), seem well beneath the level of excitement and anticipation.

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9/29/2016 4:01 PM
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