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I wrote about 3D Systems' (DDD) mixed short-term picture two weeks ago, and the stock performance since the article was written was mixed and volatile. It did not make much headway, but is holding nicely given that the general market environment is also volatile. There is more positive news surrounding the company lately, and some cause of concern, since the main competitor Stratasys (SSYS) is reportedly in talks with Makerbot, which would allow Stratasys to compete with 3D Systems on the consumer side of the business, which was largely neglected so far by Stratasys.

The big picture

The general market has been experiencing selling pressure since mid-May. The distribution day count is mounting on the S&P 500 (SPY), with higher volume down days. The selling pressure comes from the Fed, and the market is worried about the earlier tapering of the Quantitative Easing. The recovery at the end of the week came on lower volume, showing that the buying power is weaker than the selling pressure in the preceding days. If the weakness in the general market continues, it will certainly pressure the price of 3D Systems in the near term.

Good news

The Wall Street Journal published a bullish article on 3D printing stocks last week. The article cited three big companies using 3D printers: General Electric (GE), Ford (F) and the toy maker Mattel (MAT). GE's Aviation unit prints fuel injectors and other components in its jet engines. The engine is expected to be fitted for commercial aircraft by 2016. GE is also experimenting with 3D printing to produce a medical device - the ultrasound probe. The 3D printing technology could help cut costs of manufacturing. Ford has been using 3D printing since the 1980s to prototype automobile parts for test vehicles. Ford saves an average of one month of production time to create a casting for a prototype cylinder head. In the future, customers might be able to print their own replacement parts. Mattel engineers use 3D printers to create toy parts of almost every toy the company manufactures. In the future, consumers might print their own toys using the company's software. There is certainly a vast potential in 3D printing and the demand is going to strengthen as the technology improves and expands, the costs drop, and when there is a much wider use than there is today.

In late May, 3D Systems announced an exclusive agreement with Synnex Corporation (SNX), a major IT hardware distributor. Under the agreement, Synnex will sell and support 3D Systems' complete portfolio of personal and professional 3D printers and materials through its PRINTSolv Wide Format group in both United States and Canada. 3D Systems' CEO Avi Reichental said in the statement:

"This new relationship substantially expands our North American reach through a Fortune 500 organization with a track record of delivering exceptional customer service."

This deal, along with the recent deal with Staples (SPLS) will certainly help to bring 3D printers into the market, and expand its use. The management promised a harder push in the consumer market, and it is delivering on that promise with these two deals. I am looking forward to the second half of the year, when the first results of the consumer initiatives are reflected in the company's financials.

Will Stratasys focus on the consumer market?

TechCrunch reports that Stratasys is in talks with Makerbot, the Brooklyn-based 3D printing company regarding a possible acquisition. Stratasys has yet to turn focus to the consumer market, as it currently makes high-end, professional 3D printers for industrial applications. Makerbot has generated $50 million in revenue this year. Makerbot makes the innovative Replicator, an easy-to-use desktop 3D printer, which sells in $2,000 to $2,800 range. The acquisition would allow Stratasys to compete with 3D Systems' Cube line. But, let's not forget the recent shelf offering of 3D Systems, as the company intends to use the funds for further acquisitions. They might try to acquire Makerbot too.

Conclusion

The general market volatility might put more pressure on the stock price, and Stratasys' potential acquisition of Makerbot might help it to expand in the consumer segment of the 3D printing space. On the other hand, two recent deals with Staples and Synnex are very good for 3D Systems, and provide the company with an opportunity to sell much more products in the future. The Makerbot acquisition by Stratasys is just a rumor at the moment, and 3D Systems might bid for the company too. So, the short-term picture for 3D Systems remains mixed.

Source: 3D Systems: More Good News And Tougher Competition