3D Printing Stocks: Which One Is Least Likely to Get Clobbered by Hewlett-Packard?

Hewlett-Packard Company's (HPQ 0.69%) much-anticipated announcement about its entrance into the 3D printing market arrived late last month. The 2D printing king unveiled its 3D printing technology called "Multi Jet Fusion" and shared its plans to bring an enterprise-focused 3D printer based upon this tech to market in 2016. The printer is reportedly 10 times faster than those powered by the leading 3D printing technologies, while sporting high precision, high resolution, and brilliant color capabilities -- and it will be priced less than the competition.

Given its purported impressive features, it's not surprising that 3D printing stocks in general trembled in early trading on the day of HP's big unveil. Uncertainty lingers, and could be an obstacle for this group going forward.

So we're going to examine this question: Which 3D printing stock is least likely to be negatively affected when HP enters the market? To be clear, we're not exploring which 3D printing stock is the overall "best" one or which one is the safest from all risks, just which one will likely be best insulated from competition from HP.

The candidates

There are six pure plays (companies that derive all of their revenue from 3D printing) that trade on U.S. stock exchanges. Belgium-based Materialise, which went public in June, isn't included, as its history as a public company is so brief.

Data source: Yahoo! Finance; data as of Nov.18.

(Organovo Holdings also isn't included here, as it's better considered a biotech play: It's a tissue-engineering company that 3D-prints human cells to produce tissues.)

Elimination Round No. 1: 3D Systems, Stratasys, voxeljet

I'm getting rid of the two industry leaders, 3D Systems and Stratasys, as well as voxeljet.

The reason is materials-related: They all generate a considerable portion of their revenue from the plastics end of 3D printing. HP's printer will initially only be able to print in plastics. It's likely HP will market its printer directly to enterprise customers and also to 3D-printing service bureaus.

There's no way to know what percentage of each 3D printing company's total revenue could be affected by HP's entrance into the market. None of the companies provide that level of detail in their financial reporting. (Stratasys investors and potential investors may want to check out "HP's 3D Printing Technology: How Concerned Should Stratasys Ltd. (SSYS) Investors Be?".)

We do know, however, that sales of enterprise-focused 3D printers that print in plastics, sales of the plastic materials themselves, and on-demand printing of plastic components comprise much to most of 3D Systems', Stratasys', and voxeljet's revenue. 3D Systems also sells printers that can print in metals -- though this fast-growing segment is still a small part of its business -- and other substances, such as ceramics and foodstuffs. It also offers on-demand 3D-printing services in a variety of materials. Stratasys only sells printers that have plastics capabilities; however, its services business has metals capabilities. Voxeljet sells printers that can print in sand, as well as plastics, and also offers 3D-printing services in both materials. It was also recently working on developing new material sets. 

Two semifinalists: Arcam and ExOne

That leaves us with our two semifinalists: Arcam and ExOne. Neither is involved in plastics. Arcam is a pure play on industrial metals. ExOne sells printers that can print in several materials, such as metals, sands, and glass, and also provides 3D-printing services in these materials. 

Elimination Round No. 2: ExOne -- so the winner is... Arcam

Acetabular cup (for hip replacement). Source: Arcam.

While HP's 3D printer won't initially have materials capabilities other than plastics, the company said that it plans to eventually add metals and ceramics capabilities.

I'm a bit skeptical that HP's tech will be able to successfully compete with direct metal laser sintering, which is the most common metal 3D printing tech, and electron beam melting when it comes to printing metals. (Among the public companies, 3D Systems offers DMLS printers, while Arcam is the sole manufacturer of EBM printers.) HP's tech has some similarities with binder jetting, as it uses a binding or fusing agent to bind the powdered materials together. And binder jetting generally isn't considered as effective as these technologies at producing very high-density metal components. Very high densities are required for critical end-use applications, such as in the aerospace and medical implant industries. However, HP is surely pouring big money into research and development, so a competitive metal 3D printer is possible.

While we can't be certain, it seems likely that ExOne -- whose metal printers use a form of binder-jetting tech -- would be more vulnerable than Arcam to competition from HP if and when HP's 3D printer is able to print in metals. This is because, with the exception of Inconel, ExOne's metals capabilities are more garden-variety than are Arcam's, and would likely be easier capabilities to develop. In addition to Inconel, ExOne's printers can print in bronze and stainless steel-bronze alloys. Arcam's printers can print in Inconel, titanium, titanium alloys, and cobalt-chrome alloys. Inconel and titanium are key aerospace metals, while cobalt-chrome alloys are used in some medical implants.

Showdown wrap-up

Arcam is the least likely among the companies covered in this article to be negatively affected by HP's entrance into the 3D printing space, in my opinion. So, investors who are particularly concerned about the potential threat HP might present may want to further explore Arcam as an investment.

Though, again, to be clear, this does not mean that Arcam is the "best" 3D printing stock, nor does it mean Arcam has the least overall risk. In fact, Arcam is very specialized -- it has just one metal technology, EBM -- which adds to its risk level. However, the company also has notable positives, not the least of which is that it was profitable over the trailing-12-month period from a generally acceptable accounting principles, or GAAP, basis.