Why 3D Printing Stocks have tanked, and why that actually signals great news for the industry

Why 3D Printing Stocks have tanked, and why that actually signals great news for the industry

A lot has been made in the press of 3D Printing stocks – most notably Stratasys and 3D Systems – over the last several years. First, they were darlings of Wall Street, reaching astronomical valuations buoyed by the seemingly unlimited potential of the technology, corresponding expectations for hyper growth, and their leading market positions. But something happened in the last year or so – the companies that had been grabbing headlines for their burgeoning market caps were getting those headlines for disappointing investors, missing earnings, and plummeting stock prices.

To an outsider, this might signal an ominous sign for the 3D Printing industry. Perhaps the technology has hit a wall – the hype was simply too big and the substance isn’t there to match it. Some have argued that the technology is passing through the fabled “trough of disillusionment,” when a public that had become enamored with a new technology’s potential comes to terms with the hard truth that its actual capabilities are a far cry from the headlines.

While there is cause to temper the most aggressive expectations somewhat – people will not eventually print everything at home, for instance (more on that in another post) – I would argue that these stocks tanking is a good sign, rather than a bad one, for the industry and technology as a whole. 3D Printing continues to retain the same promise it’s always had, and the advancements in the technology are rapid and encouraging. However, 3D Printing stocks have been getting hammered because those companies that are publicly traded are going through a genuine trough of disillusionment regarding their ability to corner this emerging market. They have suffered from some questionable acquisitions, pursuit of a consumer market that isn’t quite there yet, and a number of other factors that have given investors just cause to deflate valuations of those specific stocks.

But the industry marches on, and marches faster.  A few key facts to consider…

  1. Market growth was enormous last year, outpacing consensus expectations. According to Wohlers and Associates’ annual report, the global 3D Printing market revenues – defined as the combination of printers, feedstocks, and services – grew from $3.1B in to $4.2B in 2014. That’s a 35% growth rate, outpacing virtually every industry analyst’s expectation. Major printing stocks couldn’t keep pace with that industry growth – last quarter, DDD was up 8.8% over the same period last year, and SSYS was similarly up 14.4%.  Not bad, but not 35%.
  2. New innovations are introduced to the market on a seemingly weekly basis. Take the eight day span from March 17-25 for instance, when not one, but two companies – Carbon 3D and Australia’s Gizmo3D – publicized videos with prototype printers executing stereolithography-esque printing at speeds of 25x-100x what the market currently offers. Just a few months prior, HP officially announced its intention to become a major player in the market, with plans to introduce its MultiJet Fusion technology to the market before the end of 2016. And a few months later, Cosine Additive showed at RAPID with a large form FDM printer to compete with Stratasys’ Fortus 900mc.
  3. Metal printing is exploding. EOS, Arcam AB, Concept Laser, SLM Solutions – all are signaling significant growth to the market. Take Arcam AB (the only publicly traded metal printer manufacturer of the bunch), for instance, which reported healthy growth and earnings in 2015 with a 105% increase in sales and 208% increase in earnings per share.  Its stock price has also slid in the last year, but one might argue that’s a case of presumed guilt by association with other 3D Printing stocks.
  4. Businesses that have invested in industrial grade equipment are busy and investing in new equipment. Since our company, 3Diligent, is in the business of connecting supply with demand for on-demand rapidly manufactured parts, I can attest to this from firsthand meetings with 3D Printing service providers and corporations.   Quality service providers are busy and continuing to expand their industrial machine base.  Seemingly every company has “Develop a strategy for 3D Printing” in its leadership directives.  The demand is growing and the supply is growing to match it – in some cases, it’s backlogged.  Incorporating additive manufacturing into product design and inventory management activities is simply too disruptive and potentially beneficial to ignore.  And that isn’t to even consider the larger mass manufacturing implications for 3D Printing when a broader swath of designers understand how to optimize next generation designs for the technology.

So it’s important not to conflate disappointing performance by a few publicly traded companies with broader industry performance and prospects. Stratasys and 3D Systems continue to manufacture some of the industry’s most reliable and fully featured printers – particularly when it comes to plastics and resins. It’s just that Wall Street is coming to realize, among other things, that innovation with a technology this revolutionary is going to come from many places, and no two companies are going to be able to corner all of the market’s growth.

All things considered, this is great news for anyone hoping 3D Printing will guide us through another Industrial Revolution. Competition breeds faster innovation, better products, and more competitive pricing.  So don’t lose heart that a few stocks have taken it on the chin the last few quarters – the future of 3D printing is very bright indeed…

 

Cullen Hilkene is CEO of 3Diligent, the Sourcing Solution for Industrial Grade Rapid Manufacturing. He is an alumnus of Princeton University, the UCLA Anderson School of Management, and Deloitte Strategy and Operations Consulting. For more information about 3D Printing and to access 3Diligent’s marketplace of 3D Printing vendors, visit www.3Diligent.com.

 

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