The 3D printing industry is growing at an exceptional rate at the moment, and the early entrants are enjoying the fruits of early growth. Companies like 3D Systems (NYSE:DDD), Stratasys (NASDAQ:SSYS) and ExOne (NASDAQ:XONE) are reaping the benefits of this hyper growth and the stock prices of these companies have skyrocketed. These companies have expanded product portfolios and grown revenues at breakneck speed and I expect the growth to continue in the next 2-3 years.
There are a lot of other smaller players operating in the sector but I will be focusing on Stratasys in this article. Stratasys has been one of the best companies in the market and the stock has almost doubled during the past twelve months. However, I believe the exciting times are just starting for the company and it will prove to be an excellent investment in the long-term.
One of the biggest strengths of the company is its diverse portfolio of printers. The company was mainly operating in the industrial segment of the industry (there are three prominent segments of 3D printing industry namely: hobbyist/domestic market, medical devices and industrial manufacturing - in order to get detailed analysis of the industry, please read my previous articles). Stratasys has four printers available in the production series - these printers can address the needs for almost all the major size categories. As a result of the strong presence in the industrial segment, I believe Stratasys is the best positioned company to capture the growth in the segment. One of the biggest strengths for Stratasys is the partnerships and long-term relationships with customers. Stratasys builds strong ties with its customers in the industrial segment and the majority of its customers are extremely pleased with the company.
In addition, the acquisition of Objet3D has allowed Stratasys to establish a strong foothold in the medical devices segment (the second fastest growing segment). The demand for 3D printing equipment is increasing in the medical devices segment as the labs look for more precision in the manufacturing of different devices. Stratasys has always been known for the strength of its parts made for design and prototype. However, Objet had an upper hand in making finished articles. The merger with Objet was the perfect way of entering the medical devices segment, which combined the strength of Stratasys and precision of Objet. We will soon start to see the benefits of the merger and Stratasys will be able to record substantial revenue growth. The merger will allow the company to have a considerable control over prices as it has made Stratasys the biggest player in the segment.
As I mentioned above, Stratasys is unlikely to face much competition in the medical devices segment as it is the biggest player. However, the recent acquisition of Makerbot has put the company in the direct competition with 3D Systems. The hobbyist/domestic segment of the industry has been the fastest growing segment and 3D Systems has exploited the segment very nicely. Stratasys will face tough competition from 3D Systems in this segment and we might see a price war starting soon. This should also be kept in mind that this segment already has a number of smaller players that are focused on providing cheap, small printers to hobbyists. In addition, 3D Systems has a strong global presence which allows the company to diversify its risk. However, when we talk about the industrial segment, 3D Systems is no match for Stratasys.
ExOne is the smaller player compared to the other two companies mentioned in this article. The company has been growing at an astonishing rate and the stock has doubled since the IPO. However, after the initial surge, the stock has pulled back and currently trades substantially lower than the $78.80 high it reached in August. The biggest reason for the fall is the doubt about the future growth in printer sales. Other two giants are unlikely to face this issue due to the diverse portfolio and printing materials. ExOne needs to modify its business model and introduce new models as well as printing materials in order to increase the exposure of the company. The company needs to develop a niche and target a set of customers in order to extract future growth.
Stratasys has become the leading player in the industry and currently it is operating in the three major segments of the 3D printing industry. Recent mergers and acquisitions have allowed the company to grow rapidly. The merger with Objet and Makerbot will soon start to bring in substantial revenues and the company will continue to grow its sales at an impressive rate.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.