The 3D printer sector is an interesting space - the future is still unknown, but the components are being formed. In my article I plan on discussing the current players, and where the market may be heading and the best way to play it.
Though the 3D printing space is still in its infancy, it is already having a major impact. Some of the uses for 3D printing are obvious while others are still waiting to be discovered.
The commercial 3D printing space can be used to revolutionize the concept of business. There is no longer a need for finished inventory, and when the products are "created" they can be designed specifically towards the customer (at no extra cost to the manufacturer). As the technology develops, so will the implementations and market, but for the time being it is already having a major impact.
Invisalign (ALGN) is showing how 3D technology can revolutionize an industry. The old metal braces are now out of use, with a great idea and the use of 3D printers. Now, your dentist can customize plastic aligners to fit exactly your mouth, which are replaced every several weeks for a cheap price.
3D printers are also revolutionize the entertainment and movie business. Companys can now create a single 3D model, which can be molded to a full size mannequin and computer animation, as well as being used to create miniature models of the character. 3D printers are a great way of creating miniature models, lowering costs and allowing differentiation between models.
Future Commercial Uses
The future of 3D printers is unknown, but part of it is coming into the light. Companies like Organovo (ONVO) are using 3D printers to replicate human cells, and even organs, to help patients overcome certain diseases. 3D printing offers a distinct advantage over other treatments, as the human tissue is cloned/formed directly from the patients own cell(s).
3D printers can even be used to replicate edible food, with the same taste, texture, and juices. Using 3D printers, chefs can prepare novelty and specialty dishes at the fraction of the cost and time (and even offer bigger portions). Perhaps the biggest future potential for 3D printers is in your own house...
3D printers are a relatively new technology, and considered by many to big the next "big breakthrough". Imagine being able to create your own toys, food, or even furniture right from your house! The uses aren't the question - the question is how to get it into your house...
There are many 3D printer companies, but I will analyze those with the biggest potential and a means of getting there:
*Trailing Twelve Months (TTM)
The companies which have the most potential are those which are currently profitable on growing revenue. The main contenders for this title is 3D Systems (DDD) Organovo : 3D systems is growing revenue rapidly, and trades at a more realistic multiple (based on sales), while Organovo is currently a smaller company which will make it harder to expand. 3D Systems has the "first mover's advantage" spending millions on M&A, capturing strategic companies (as well as Stratasys which acquired MakerBot) like RPDG (manufacturing models using 3D printers for customers) and 81% of Pheonix Systems (metal printing solutions).
3D Systems also founded Geomagic 3D Solutions (content to print solutions) and added to its Quickparts program in the most recent quarter. Quickparts is a special service launched by 3D systems (similar to 3-Ders.org) in which customers can buy 3D designs for certain parts that they need. Also in the quarter 3D Systems announced a partnership with Deloitte to "accelerate adoption and implementation of advanced design and manufacturing solutions." They are working to create a distinct advantage over their competitors:
Currently, most of the 3D printer sales are in the commercial world. Companies compete by both services and materials. ExOne (XONE) has the ability to use both metal and glass for their 3D printers, while Stratasys (SSYS) has implemented their 3D printers for aerospace and architectural purposes.
Why is this important for 3D Systems? 3D Systems is expanding both their product and service revenues through these mergers and acquisitions, trimming competitors' advantages. By being able to choose from multiple materials, for multiple uses, with multiple disegins, from multiple locations, 3D Systems will be the place to go for 3D printing. In the most recent quarter ending on June 30, 2013, 3D Systems earned more than $37 Million in service revenue - with the extension of Quickparts and Geomagic, the numbers are only due to increase. The great thing about the service revenue is that they already have the customer base in place, as well as the service, which allows them to earn a large amount of perpetual income.
The majority of 3D System's revenue comes from their products which also come with high 60% margins which might drop with their growth. They are expanding aggressively into consumer printers through retail partners like Staples - while the potential is there, the margins on the printers are lower.
Their revenue is expanding aggressively, but so is their spending and share count - much of the increase in spending is for SG&A, but the increase in R&D shows that 3D Systems is focusing in on their future.
While the current evaluation of the stock might be a little lofty to some, it is one of the best ways to play the fast growing "3D printing" space... not only do they have the current prospects, but they are also positioning themselves for aggressive growth in the very near future - just like the 3D printing market.
With a forward P/E of 37, and a short interest of more than 26%, there are many doubters. But when you look at the expected 24% revenue increase, and $350 Million in cash on the balance sheet, they are in a position for strong growth. Through their partnerships and M&A they are alligning themselves to be a major contender in the personal and commercial printing markets. While there is downside, 3D Systems is helping to create the building blocks for the entire industry, forming a new face for 3D printing.