Shares of the two biggest pure-play 3D printing companies, 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS), plummeted 8.8% and 7.4%, respectively, on Friday. The Friday the 13th culprit wasn't Jason, like in the movie, but new competitor HP Inc. (NYSE:HPQ), which announced stepped-up 3D printing plans for its 2018 fiscal year.
For 2017, 3D Systems stock has lost 10.1%, while Stratasys has gained 29.4%. For context, the S&P 500 has returned 15.9% so far this year.
Here's what you should know.
HP's 3D-printing expansion plans include entering the metals space
HP entered the enterprise 3D printing market last year, when it launched two polymer 3D printer models powered by its speedy Multi Jet Fusion technology: the Jet Fusion 3D 3200, aimed at prototyping applications, and the more powerful 4200, geared toward short-run manufacturing applications. At the time of the launch, HP also announced it was partnering with a bevy of top companies, including Nike, BMW, Johnson & Johnson, Autodesk, Jabil Circuit, Materialise, Proto Labs, Siemens, and Shapeways.
At its annual analyst meeting on Thursday, HP said its 3D printing business is experiencing "significant momentum." Within a year, the company said it's garnered customers that are leaders in key verticals, sold 3D printers to repeat customers, generated some multiple orders, engaged with more than 50 materials manufacturers -- unlike 3D Systems and Stratasys, HP has an open materials platform -- scaled out to all geographic regions, and partnered with more than 65 resellers.
Moreover, the company plans to not only continue to expand its polymer 3D printing business, but also enter the metal 3D printing market -- which, notably, has been the fastest-growing space in the 3D printing realm in recent years. It was this news that likely accounted for the bulk of the downturn in shares of 3D Systems and Stratasys, in my opinion. While many industry observers no doubt believed that HP would eventually enter the metals business, the company's plans to do so so soon after entering the polymer 3D printing business likely took a good number of folks by surprise.
What HP's 3D-printing plans mean for 3D Systems and Stratasys
It's obviously not good news for 3D Systems and Stratasys that their deepest-pocketed competitor appears to be making good progress in its nascent polymer 3D printing business, and is planning on entering the metal 3D printing market in fiscal 2018. When the latter occurs, no part of 3D Systems' and Stratasys' businesses will be insulated from competition from HP.
To quantify things a bit: 3D Systems does make 3D printers that print in metals, and also offers metal 3D printing in its service operation. It's probably safe to assume that its metal 3D-printing product business still accounts for less than 10% of its total revenue, based on comments made on the third-quarter 2016 earnings call. The company's 3D-printing service business also offers metal 3D printing. Stratasys does not produce metal 3D printers, but its service business does provide metal 3D printing.
Stratasys has recently been strengthening its exposure to metal 3D printing. Earlier this year, it announced that it made a strategic investment in LPW Technology, a leading developer and manufacturer of metal powder solutions for the 3D printing market, and announced a strategic partnership with start-up Desktop Metal, which makes metal 3D printing systems.
In short, it's not surprising the market reacted as it did. HP's expansion into the metal 3D-printing market means that it just became an even more formidable competitor to 3D Systems and Stratasys.
Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson and Nike. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool has a disclosure policy.