3-D Printers, 3D Systems Corporation (DDD) and More: How I Learned to Stop Worrying and Love Volatility

Page 1 of 3

Seems like hardly a week goes by without another dramatic and seemingly random price swing for 3-D printers. The 3-D printing industry has fascinated investors with its ability to instantly manufacture custom-designed objects and has been name-checked frequently by major media outlets, popular television personalities, and the president of the United States. Industry giants 3D Systems Corporation (NYSE:DDD) and Stratasys, Ltd. (NASDAQ:SSYS) have both shot up more than 100% over the past 12 months, as new interest surges in an industry that’s actually decades old. What’s an investor to make of all this movement?

3D Systems Corporation (NYSE:DDD)Author Douglas Adams gave the best advice possible in this situation (and many others): Don’t Panic. Short-term thinking is no good for long-term investors like us, so when 3-D printers have wild price swings on no relevant news, we shouldn’t assume there’s a bursting bubble we need to get away from or a big rally we need to get onboard for. Instead, think about why you’re invested in the company in the first place, and whether anything has happened to change that thesis.

Today, the idea that 3-D printing will continue to grow in popularity isn’t being challenged, but rather investors are worrying whether the price of 3-D printing stocks has simply risen too high, reflecting irrational exuberance that far outpaces realistic outcomes. With the major 3-D printers trading for dizzying prices around 80 times earnings, it’s only realistic to ask if it’s even possible for 3-D printers to deliver on expectations. In this case, it’s useful to look at how big 3-D printing might actually get, by thinking about the addressable market.

It’s difficult to predict what sort of applications 3-D printing will find in a decade or more, so let’s look at what 3-D printers are useful for now. Most obviously, 3-D printers are great at turning out little plastic toys and trinkets. I believe there’s no long-term business opportunity here. The ability to churn out the low-quality machines that make low-quality plastic novelties has become too commoditized to support solid earnings, especially since nonprofits and academic organizations have taken an interest in promoting the technology.

Where commercial 3-D printers such as 3D Systems, Stratasys, and newly public ExOne Co (NASDAQ:XONE) really shine is in the market for high-value, low-volume items that require exacting manufacture and sophisticated print materials. There are two important markets here: prototypes manufactured for the research and development of new products, and health products created to perfectly fit a given human body, including items such as replacement hips, dental fillings, and hearing aids. So just looking at the applications we know 3-D printing can compete in today, what’s the market opportunity look like?

On the life science side, just the market for 3-D-printing-friendly health applications is estimated to be around $40 billion. That dwarfs the current size of the 3-D printing industry, but it looks like chump change compared with 3-D printing’s other major opportunity.

In 2013, the world will spend $1.5 trillionon research and development. This matters, because when you’re designing products for the real world (that includes everything from airfoils to running-shoe soles), it improves the design process to be able to get a physical version of a design to test out, sort of like an industrial first draft. Designers have three choices when making these prototypes: make them by hand, fire up a full-scale factory to produce only a few items, or 3-D print them. Increasingly, industrial designers are finding that 3-D printing isn’t just faster; it’s cheaper. As such, I expect 3-D printing to win in the rapid prototyping space.

Page 1 of 3
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!