The Aniwaa team investing some of their hard earned money in shaky 3D printing stocks (allegory).
Disclaimer: we are not financial analysts and have almost zero experience in trading and stock markets in general. We own stocks of Stratasys, 3D Systems, ExOne, voxeljet and Organovo.
3D printing is often presented as a technology with the potential to kickstart the next industrial revolution. Reports from major consulting firms and insights from industry experts almost always agree: 3D printing is a very promising niche in the industrial landscape and overall, this technology has a bright future ahead.
However, despite the actual rapid growth of the sector and the massive adoption of 3D printing by companies, most 3D printing stocks have been collapsing for the past year or so. There’s a big disconnect between the optimism of most industry forecasts and the wariness of investors towards 3D printing stocks.
We’ve been talking about this topic for months in our team and although we clearly lack investing experience, here’s a modest summary of our views on the topic (spoiler: we still think there’s potential in 3D printing stocks).
1. WHAT ARE THE MAIN 3D PRINTING STOCKS AVAILABLE TODAY?
3D Systems (DDD)
The oldest 3D printing company (founded in 1986), 3D Systems is quite diversified, with products ranging from consumer-grade 3D printers to industrial machines. Despite a solid run at the head of the company, long time CEO Avi Reichental resigned in October 2015 after another rough year, the stock trading now around its all time low.
Widely considered as the barometer for the 3D printing industry given its dominant position on the enterprise market, Stratasys is also the biggest 3D printing company when it comes to market cap. The acquisition of Makerbot in 2013 provided them with an entry point to the consumer market. The company’s stock has been sliding dangerously after the 2014 peak, with lower than expected quarterly revenue and overall lack of visibility on the mid-term strategy.
This German manufacturer of industrial 3D printers also offers on-demand parts printing for companies. After peaking in November 2013 at $59, their stock is now hitting rock bottom, trading around $6. This manufacturer is less visible than its US-based competitors and despite the low price, investors are wary about this stock.
Another US manufacturer of industrial 3D printers, ExOne specializes in big and expensive additive manufacturing systems. As an example they’re forecasting to sell only 12 to 16 of these systems in Q4 2015. The company’s stock stumbled again after they missed their Q3 earnings and revenue estimates, again. The company’s stocks are now trading around $10, far from the all time high of $68 in August 2013.
Organovo is in the business of bioprinting, which is a potentially groundbreaking application of 3D printing to create organs using human tissues as printing material. This stock rose quickly in 2013 but investors now seem less impressed by the company’s potential and more concerned about the lack of profitability, the absence of clear product launch timeline and the high burn rate, caused in part by expensive R&D projects and clinical tests.
Note: other 3D printing stocks are available for trading outside of the NYSE such as Arcam (ARCM), Tinkerine Studios (TTD), Materialise (MTLS), and probably other we don’t know about!
2. WHY ARE 3D PRINTING STOCKS FAILING?
A common pattern has been outlined by many analysts of the additive manufacturing sector: after a big peak in late 2013-early 2014, most if not all 3D printing stocks have plummeted. This dynamic reminds us of the well-known hype cycle from Gartner. Could 3D printing stocks be hitting the “trough of disillusionment” following the “peak of inflated expectations”?
If the over expectations from the market certainly played a part in this trend, we think other factors should be considered when analyzing the demise of 3D printing stocks.
- Investors expectations were too high and 3D printing companies have been consistently under delivering.
3D printing has been overhyped as the next industrial revolution. Investors have been expecting the kind of growth they see in other Tech sectors, where unicorn companies are no longer that rare and where venture capital firms seem to make fortunes off companies with far less tangible impact than 3D printing. The reality is different: 3D printing companies – at least the publicly traded ones – have more in common with cars manufacturers than Silicon Valley startups. Major 3D printing companies such as Stratasys or 3D Systems are not lean and agile organizations. They are not running “hockey stick” businesses. Investors have started to realize that.
- Top management of publicly traded 3D printing companies have failed to provide long term vision and compelling strategies.
There are many examples of the lack of strong leadership in a sector which should be full of Elon Musk or Steve Jobs. Who said Bre Pettis? Makerbot’s iconic founder was indeed for a time the face of 3D printing for the rest of the world. After a short stint at Makerbot’s parent company Stratasys, he has now left the mothership and set out (once again) to change the world with 3D printing. SO much for those who had bet on his leadership to revive Stratasys.
Poor strategy and execution seem common among big 3D printer manufacturers, who too often see competitive acquisition as a way to make up for their inertia. The results: companies without a clear mission or culture, sitting on their laurels and refusing to change, whose competitive edge lies in soon to expire patents and cartelized distribution network from another era. This may be a bit unfair but you get the point.
- Only a handful of 3D printing companies are actually publicly traded, and they’re not the most promising ones.
You can’t buy stocks in the most exciting companies in 3D printing today. These companies are often funded by venture capital firms, whose investment provide the cash to fuel the growth and enable them to conquer market shares until they become profitable. So who are these fast growing startups that could one day become serious alternatives for investors willing ot buy 3D printing stocks? We’re thinking 3D Hubs, Shapeways, Formlabs, Zortrax, Ultimaker, Fuel3D…
The example of 3D hubs is quite revealing. This company is what happens when shared economy meets 3D printing: they allow owners of 3D printers to monetize their machine by joining their fast-growing global network. With a flawless execution and smart funding, the team managed to quickly scale up their operations and 3D Hubs could now contribute to slow down sales of expensive industrial 3D printers, by offering a much cheaper alternative to end-users who need industrial-grade 3D printing but don’t want to invest $300k in a complicated 3D printer.
You get the idea, there’s a new generation of 3D printing companies, they have learned from the successes of Tech startups and apply the recipes to the 3D printing field. They’re aiming for the top spots in a rapidly changing landscape and investors may perceive their potential IPOs as the next big thing in 3D printing investment.
3. IS NOW THE RIGHT TIME TO BUY 3D PRINTING STOCK
That’s a tricky one and there are many ways to answer this question. We adopted a very simple approach here.
Overall we believe in 3D printing. We see the current level of the available stocks as an opportunity, as they’re all close to their all-time lows. We have a small disposable sum that we wanted to invest and we’re fine if we lose it all (although our egos might hurt). We have a relatively good understanding of the 3D printing industry, working in this field for 3 years now.
We decided to split our $2k investment between all of the companies mentioned above, overinvesting a bit in Stratasys (we think it’s the most reliable) and 3D Systems (cheap!), as we believe these two are “too big to fail”. As for the others, the stocks are quite cheap and we figured that best case scenario we have a good surprise five or ten years from now, worst case we lose a few hundreds bucks. Nothing that would have paid for our retirements in any case.
You may wonder why we invested in these 3D printing stocks in the first place, given what we said and the lack of facts to suggest the stocks will bounce back in the near future. But something else has to be taken into account: several big industrial companies are rumored to soon enter the 3D printing market. Some have already stated officially their ambition such as the computer/print giant HP. Some have not shown their hands yet, like General Electrics. Other conglomerates see the potential of 3D printing, a technology which could nicely complement their current operations. We’re thinking of the Japanese Canon and Ricoh, who both recently announced they’d launch industrial 3D printers soon, or Epson, Dupont…. And don’t get me started with the usual suspects, the GAFA (Google Apple Facebook Amazon) who all quietly make moves on the 3D printing chessboard (think about Google’s investment in Carbon3D).
We think these big companies might want to buy their way to the 3D printing battlefield and acquire one of the currently traded players. These players are not in a great shape but they still have a lot to offer to a newcomer on the 3D printing market, from patents to factories, engineers, trained sales force and global distribution networks… Such acquisition or alliances could mean restructurations, new strategy and leadership, and ultimately drive the stock prices up.
So yes, we realize this is more a gut feeling than a proper financial analysis. We’ll see what the future has in store for us and we’ll update you regularly on the state of our portfolio. At the time of writing this article, we’re up 1%. Maybe we should sell now? (correction: at the time of publishing this post, we’re now down 12% 🙁 )