The 3-D Printing Revolution Is Underway - 2 Companies With Dominant Market Share, Rapid Growth Potential

Includes: DDD, ONVO, SSYS
by: Andrew Bowden

3D printing is a rapidly growing technology sector that is still in its infancy. The ability to create highly detailed custom works at a fraction of the price is bringing waves of retail investors into these stocks. 3D printing is expected to replace many hands-on jobs as less human involvement is needed in manufacturing. Stratasys (NASDAQ:SSYS) and 3D Systems (NYSE:DDD) are at the forefront of monetizing their 3D printers; both companies have recently announced their new product line of affordable 3D printers for the general public.

What does Stratasys do?

Stratasys, Inc. is a manufacturer of three-dimensional 3D printers and 3D production systems for the office-based rapid prototyping (NASDAQ:RP) and direct digital manufacturing (NYSEARCA:DDM) markets. The Company develops, manufactures and sells a product line of 3D printers and RP systems (and related consumable materials) that create physical parts from computer-aided design (NYSEARCA:CAD) designs. It also offers rapid prototyping and production part manufacturing services through its centers located in North America, Europe and Australia. The Company's products are used in the aerospace, defense, automotive, medical, business and industrial equipment, education, jewelry, architecture, dental, and consumer-products markets. In May 2011, the Company acquired Solidscape, Inc.

Stratasys recently jumped 50% to $52 a share as a result of their recent merger with another 3D printing company based out of Israel, Objet. The merger is estimated to increase the market cap of Stratasys to $1.4 Billion. Both companies boast increasing revenue growth for their products Y/Y. Stratasys currently has no debt, and will continue to remain so even after the new merger with Objet. The current 52 week high is $53 (which was obtained in early 2011) with a low of $17.88. The all-time high was attained before the merger was even calculated into the value of the company.

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According to Zack's Analyst Blog:

Revenue has grown substantially

Stratasys reported total revenue of $45.0 million in the first quarter of 2012, up 30.0% from $34.6 million in the year-ago quarter. The company saw substantial revenue growth, with revenues from the consumable segment expanding 30%. The company also witnessed 61.0% year-over-year sales growth from the Fortus 3D production system.

The company recorded a record jump in system shipments, which stood at 822 units for the first quarter of 2012 compared with 567 units for the same period last year.

Segment wise, revenues from Products came in at $37.5 million, up 33.6% from $28.10 million reported in the year-ago quarter. Services revenue jumped 14.4% to $7.4 million from $6.48 million in the year-ago quarter.

In addition to Stratasys, I have initiated a long position in Organovo, (NASDAQ:ONVO) a new biotech 3D printing company only a few years old. It will blow your mind learning about their innovative 3D bio printers (if you haven't heard about them yet.) Organovo's primary focus is to be able to create organs that are viable for organ transplants, as soon as possible. The company has made strides in scientific innovation every year; recently being praised for their innovative product by Popular Science magazine and other similar publications.

Currently the company generates revenue by creating skin tissue and selling them to pharmaceutical companies so they can test trial drugs for toxicology and other side effects. They have already formed a partnership with Pfizer (NYSE:PFE) to supply them with experimental samples for their research.

Other pharmacy companies will soon begin to use their tissues for their own experiments. Another revenue stream that is still being capitalized on is licensing their equipment and technology to schools like Harvard Medical School. Since the stock became available for trading publicly in February, the stock has grown from $1.27 to touching $10.90 July 18th, still continuing to grow regardless of economic woes.

Investors are realizing the potential and buying into this breakthrough company while it's cheap and unheard of. Their market cap is already $161 million, with hundreds of thousands of shares traded daily. I wouldn't worry about dips in price because this is a long-term investment that has infinite potential.

Computer technology is doubling every 14 months accelerating from the old Moore's law of every 18 months. What once thought to be impossible is now coming to fruition, and Organovo is the only company to have mastered bio printing.

The CEO of the company Keith Murphy, is a chemical engineer who is highly educated as well as experienced in the corporate world. The CFO has run several publicly traded companies and is working for low pay because of his belief in the technology and what they are trying to accomplish. With multiple patents and an ambitious, highly educated management team; Organovo's future growth prospects seem almost monopolistic. The scientific implications of mass-scale bio printers would revolutionize modern technology and health care.

This is pure speculation, but I believe this could be the catalyst that leads to cloning down the road. They are already cloning tissues and blood cells. Right now cloning may still be fallacy, but then again no one imagined we would be creating human tissue and blood cells from any cell source through a printer! If they can print blood cells, tissue, and soon enough organs; it isn't too hard to visualize a future when organic artificial replacements become a regular thing.

Disclosure: I am long SSYS, ONVO.