With tech juggernaut Hewlett-Packard (NYSE:HPQ) entering the 3D printing game sometime in late 2016 with a plastic-based inkjet technology it's calling Multi Jet Fusion, 3D Systems (NYSE:DDD), Stratasys (NASDAQ:SSYS), and other 3D printing companies could be up against some serious competition.
After all, HP claims that Multi Jet Fusion is 10 times faster than today's leading extrusion-based and selective laser sintering technologies, which will target industrial and professional markets. HP also has more than three times as much cash on its balance sheet than the 3D printing industry generated in worldwide revenue in 2014.
Consequently, investors may have grown concerned that 3D printing stocks could have much to lose once HP's 3D printer goes up for sale. What isn't clear, though, is the extent to which HP's entrance could hurt established 3D printing companies. Unfortunately, it's impossible to know that answer.
Does not compute
According to Wohlers Report 2015, in 2014, the 3D printing industry generated $4.1 billion in worldwide revenue, and it is expected by grow by about 31% per year until 2020, eventually surpassing $21 billion in annual revenue. By 2017, the first full year that HP's 3D printer is expected to be available, the 3D printing industry is projected to generate revenue upward of $9 billion.
Beyond this point, it's extremely difficult to assess how much of the industry's revenue HP will capture, and thus, the risk that it poses to 3D Systems, Stratasys, and the rest of the industry. There are too many unknown variables at play, including:
- The cost of HP's 3D printer, which may dictate how many printers it can sell.
- The versatility of HP's printer in terms of applications, which will likely determine the market share it can capture.
- Whether HP's 3D printer displaces competitor sales.
- How established 3D printing companies respond to HP's product.
- If compelling new products or technologies enter the market that make HP's offering less exciting.
- Macroeconomic factors that could affect general 3D printing spending.
While the above list isn't exhaustive, it illustrates the complexity of trying to predict the future of an industry experiencing rapid growth and change. That's why it's impossible to know before it's released if HP's 3D printer will capture 1%, 25%, or 80% of the industry's revenues.
What investors can evaluate
Because Mutli Jet Fusion leverages decades of HP's inkjet experience, 3D printing investors certainly shouldn't take the threat that HP poses lightly.
Looking ahead, 3D printing stocks are at their greatest risk if Multi Jet Fusion can successfully replace competing 3D printing technologies as time goes on. The best recourse for companies against this potential disruption is diversification outside of Multi Jet Fusion's professional and industrial scope within plastics.
In other words, if a 3D printing company is diversified in terms of materials and target markets, the immediate threat of HP entering the fray is probably being blown out of proportion.
But at the end of the day, there are far too many variables to know with any certainty the actual risk that HP poses to 3D printing stocks.
Steve Heller owns shares of 3D Systems. The Motley Fool recommends and owns shares of 3D Systems and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.