3D Systems Corporation (NYSE:DDD) is arguably the most visible player in the burgeoning 3D printing sector. The Company has entered the consumer marketplace by offering its Cube printer to retail consumers, and recently announced a deal with Staples, Inc. (NASDAQ:SPLS) for the sale of the printer. Generally, 3D printing seems to be the stuff of science fiction that is quickly becoming a reality. However, the industry is in its nascent stages, and it is unclear how the use of the technology will play out both commercial and consumer ends. As a result, stocks in the sector, including 3D Systems, have volatile trading patterns. Still, the sector seems poised for growth, and investors may want to examine whether 3D Systems Corporation (NYSE:DDD) or one of its competitors is ripe for an investment.
What should you know about 3D Systems?
3D Systems Corporation (NYSE:DDD) is focused on manufacturing 3D printing and rapid prototyping printers for both commercial and consumer purposes. The Company recently stated that its revenue for Q1 of 2013 grew 31% to $102.1 million from the prior year quarter. Revenue from 3D printers and other products increased $15.0 million to $39.7 million. Gross profit increased 38%, with non-GAAP net income growing 43% over the prior year quarter to $18.9 million. The Company completed a 3 for 2 stock split in February of this year. The purpose of this stock split was to increase liquidity and raise funds for more acquisitions.
What else?
Additionally, the Company sold 6.2 million shares including 1.3 million shares sold by corporate insiders. The Company said it planned to use the proceeds from the offering to finance future acquisitions and for working capital. However, sale of the 1.3 million shares by the insiders could be a bearish sign. Still, 3D Systems Corporation (NYSE:DDD) proved it is in acquisition mode based upon the purchase of Rapid Product Development Group, Inc., a provider of on-demand additive and traditional manufacturing services, in early May.
Stock action
3D Systems’ share price has been very volatile as of late. The stock has traded from a 52-week low of $18.33 in June of 2012 to an all-time high of $51.94 in early May. Although the stock has performed well in the past year, there have been wide price swings as shown by a monthly volatility of 6.7%. Further, the stock has a very high short float of over 26%. Despite the choppy price action, some hedge funds are making the leap to invest in the Company. Tiger Global Management, LLC increased its holdings in 3D Systems by 853,000 shares according to its most recent 13F filing. Tiger Global has a total position of 2,413,500 shares with an estimated market value of well over $77 million. Click to hear to read about Tiger Global’s other holdings.
Key peers
There are a number of competitors in the sector. Stratasys, Ltd. (NASDAQ:SSYS) is similarly a 3D printer manufacturer with a market cap of $3.1 billion. Stratasys has had the same wide price range over the past year, with a low of around $42 in June of 2012, reaching a high of $94.9 in mid May. The share price has taken a beating of over 14% in the last three trading days though, and is clearly showing bearish price movement.
ExOne Co (NASDAQ:XONE) is likely the most speculative play in the sector traded on a major exchange with a recent IPO in February. ExOne reported revenue of $7.9 million for Q1 of 2013, versus revenue of $2.7 million for the prior year quarter. It should be noted that this revenue came upon sales of only 5 total machines. Thus, sales are extremely limited. Further, the Company reported a first quarter net loss of $1.7 million. ExOne’s share price has jumped to a high of $51.88 since its debut, but has dropped 14% in the last three days. The Company has a short float of over 30%. Click here to read more about ExOne.
With regard to a more established company, albeit one who has encountered some recent trouble, Hewlett-Packard Company (NYSE:HPQ) may be a possible play for the 3D printing industry. Hewlett-Packard had entered into a distribution and manufacturing agreement with Stratsys, but that agreement was terminated in August of 2012. The Company may have terminated the agreement due to its desire to pursue its own foray into the market. Some experts have opined that Hewlett-Packard is optimally situated to profit from a boom in 3D printing due to its research and development budget of over $3 billion, as well as its extensive distribution networks. Hewlett-Packard’s stock price has rebounded admirably from a low of $11.35 in November of 2012 to a recent price of $24.5, but is still below a multi-year high of $49.55 in 2010. The Company seems to have stabilized after its recent management debacles.
Final thoughts
Stocks in the 3D printing sector are down significantly in the past week. It is too soon to tell whether this is a minor price correction, or whether it may be evidence of a longer-term trend. If it is a minor price correction, the current prices may offer an opportunity for a good entry point. Still, investors should be wary of the high short interest and the volatile price swings for the companies in the sector, including the aforementioned 3D Systems Corporation (NYSE:DDD), Stratasys, ExOne and even Hewlett-Packard. For a look at one strategy some of your peers are using to beat the market, continue reading here.
Disclosure: none
