Since the hype bubble around 3D printing burst, most major stocks in the segment have been slammed. But while valuations are at the bottom of a particularly ugly trough, the technology still has impressive potential, and plenty of room to grow.
In this video segment, Sean O'Reilly and Vincent Shen talk about how some of the biggest players in the game have been performing over the last few years, and why adoption of the technology hasn't reached the levels that had been predicted.
Listen to the full podcast by clicking here. A full transcript follows the video.
This podcast was recorded on Feb. 11, 2016.
Sean O'Reilly: The industry itself has not been doing so hot over the last 12 to 18 months.
Vincent Shen: Unfortunately not. But, again, I'm pretty pumped to talk about this topic, just because I like how it is giving a lot of different players or parties access to manufacturing capabilities that previously they would not have been able to get. So, for 3D printing, a lot of the bigger names have taken big hits over the past two years.
O'Reilly: As I understand it, there's two types of 3D printing companies. There's the industrial side ...
Shen: The more enterprise, industrial-focused side. And there's the consumer side. A lot of the companies will straddle both sectors, where some will focus trying to develop that expertise in one. But, some of the bigger companies, like Stratasys (NASDAQ:SSYS) it's down 90% over the past two years.
O'Reilly: And they're more of an industrial player, as I understand it.
Shen: I believe they had some crossover. 3D Systems (NYSE:DDD) has generally moved away from the consumer market. But Stratasys, they posted incredible double- and triple-digit quarterly revenue growth for years. And then, the products of the company stalled, the most recent third-quarter report had revenue falling 18% year-over-year for the first time in many quarters. And, they've just generally been dinged with poor execution of their strategy, in terms of integration with certain acquisitions, it's been difficult.
O'Reilly: Did the projection and the adoption of this stuff just not meet what they thought it would?
Shen: I think this was an instance where there was a lot of hype very early on in the development of the technology, and before, the adoption issue wasn't as big of an issue as people had anticipated. But it's not like this isn't a groundbreaking movement, in that regard. I still think there's tons of potential here, it's just that people need more time to basically see where the best benefits come around, where the profitability is coming in for them. But Stratasys, they reported a $1.1 billion loss for the first nine months of 2015, versus a $120 million loss for the full year of .
O'Reilly: Ooh! Was that writedowns? That's not good.
Shen: 3D Systems suffered a similar fate. The stock crashed 90% over the exact same time period, really, and their third quarter revenue fell 9%, breaking another multi-year streak of growth. They had a $44 million profit in 2013, and that swung to a $60 million loss for the first three quarters of 2015. Then, you have other players like Materialise, ExOne, again, they've had similar issues and their stocks have struggled as well. And a lot of them are just burning cash right now, trying to develop.
O'Reilly: Get the products out.
Shen: Exactly. So, in terms of the adoption thing, some of the big issues with these printers are, they're either too big, too expensive, too slow, or some combination of that. So, they haven't really moved beyond their typical uses, which include a lot of prototypes testing.
Sean O'Reilly has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool recommends 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.