This article was updated on June 19, 2015.
Since the onset of 2014, 3D printing stocks have essentially been in freefall, which has the positive effect of bringing their valuations down to much more palatable levels. Consequently, investors who can stomach high volatility could potentially find long-term opportunity from these price dips.
After all, according to Wohlers Report 2015, the 3D printing industry is expected to grow by more than 31% per year through the year 2020, and eventually generate more than $21 billion in revenue. In other words, the longer-term prospects of the industry appear to be promising.
Without further ado, here are my top 3D printing stocks for the remainder of 2015 and beyond.
Top diversified 3D printing stock
Source: Author.
Over two years ago, I argued that 3D Systems (DDD 2.31%) is the best bet for investors who wanted to own a broad-based, diversified 3D printing company. My reasoning was based on the fact that 3D Systems offers the broadest 3D printing technology portfolio in the industry, which in theory should allow it to cater to a bigger market opportunity than its competitors.
Unfortunately, in practice, 3D Systems' jack-of-all trades approach has been plagued with execution issues and a lack of focus, and has missed Wall Street expectations on numerous occasions over the last two years. For these reasons, I believe investors may be better served with Stratasys (SSYS 0.96%) as the top diversified 3D printing stock for 2015 and beyond.
Through the first quarter of 2015, Stratasys has sold more than 129,000 3D printers since the respective inceptions of its Stratasys, Objet, and MakerBot brands -- the most of any 3D printing company. As these 3D printers are put to use, they consume materials, which Stratasys tends to sell at a higher markup than its 3D printing hardware. This razor-and-blade model, driven by its large installed base, effectively sets the company up to generate long-term recurring revenue streams from the sale of consumables.
However, to be clear, Stratasys isn't free from its faults. The company has experienced ongoing performance issues with its MakerBot unit to the point that management was forced to write down more than 73% of the $403 million it paid for the company in mid-2013. This misstep has raised questions about management's ability to create shareholder value from acquisitions, and has instilled worries that the company has overpaid for other acquisitions.
Top turnaround 3D printing stock
Source: ExOne.
Although ExOne's (XONE) stock decline of more than 80% since the beginning of 2014 suggests that the underlying business suffered a catastrophic blow, there are still plenty of reasons for investors to get excited for this specialty industrial 3D printing company to turn things around in 2015 and beyond.
A major source of ExOne's disappointment in 2014 and 2015 was related to numerous product shipment delays, largely at the request of customers, which dragged on revenues and forced the company to consistently miss earnings expectations. ExOne also began a transition from targeting metal foundries -- which proved to be reluctant to adopt ExOne's binder jetting 3D printers -- to directly targeting metal foundry customers. While it's currently slow going, the hope is that this transition will eventually expand ExOne's addressable market by a wide margin, as there are more foundry customers than there are metal foundries.
To get involved with ExOne, investors will need to have faith in management's long-term vision that its binder jetting technology is uniquely suited for a variety of 3D printing applications, and that its transition from focusing on metal foundries to their customers begins to bear fruit.
Top alternative 3D printing stock
Source: Proto Labs.
Rapid manufacturer Proto Labs (PRLB 2.90%) officially became a 3D printing stock when it acquired FineLine Prototyping in April 2014, a leading 3D printing service bureau based in Raleigh, North Carolina. Consequently, Proto Labs' manufacturing services can now fluidly take a product developer's idea through the majority of the product design process -- from a conceptual 3D-printed model to a larger-scale manufacturing run in the tens of thousands, using real manufacturing processes like CNC machining and injection molding.
Where I think Proto Labs really stands out from the crowd is in the breadth of quick-turn manufacturing services it offers, and its ability to scale by leveraging cutting-edge automation technology. Together, these factors raise the barrier of entry for competitors to replicate Proto Labs' business model in its entirety, because the capital, technology, and expertise required are intensive.
In terms of disruption, Proto Labs remains better insulated from the threat of technological disruption than its 3D printing peers because it's technology-agnostic. Should a breakthrough 3D printing or manufacturing technology enter the market, Proto Labs can simply acquire said technology, integrate it into its existing operations, and offer it to its customers without skipping much of a beat. Ultimately, this adaptability gives Proto Labs an enduring characteristic.
Taking a stake
While no one can be certain how the rest of 2015 will treat 3D printing stocks, the most important factor to consider when investing in any 3D printing stock is whether or not the underlying business is operating as expected, and continues to hold the potential to deliver on its promise of earnings growth over a long time horizon. As long as the underlying fundamentals remain intact, enjoy what's sure to be a wild ride.
