Better Buy in 2013: 3D Systems Corporation (DDD) or Stratasys, Ltd. (SSYS)?

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The declining cost of 3-D printers has led to enthusiastic and widespread adoption among the medical, aerospace, automotive parts, jewelry, and even apparel industries, to name just a few. The two largest players manufacturing made-to-order objects are 3D Systems Corporation (NYSE:DDD) and Stratasys, Ltd. (NASDAQ:SSYS).

The recent surge of enthusiasm for accretive printing from the fast-rising proactive consumer, or “prosumer,” market segment has resulted in impressive gains for both companies. Stratasys increased shareholder value by 131.6% last year, while 3D Systems has seen its market cap grow by a staggering 700% over the past three years.

3D Systems Corporation (NYSE:DDD)While 3-D printing is one of the most exciting disruptive technologies to arrive on the scene in the past decade, it’s important for investors to separate the fate of Stratasys or 3D Systems as individual companies from the 3-D industry itself. For starters, the companies are taking two very different approaches to top-line growth.

The market has a very low barrier to entry. Made-to-order mail-order communities such as Shapeways have thrived, locking in an impressive 66.6% increase in consumer orders from December 2011 to January 2012. Crowdsourcing websites such as Kickstarter have also accelerated the commercial development of 3-D start-ups. Even Staples, Inc. (NASDAQ:SPLS) now offers its customers 3-D printing services on Mcor’s IRIS 3-D printer.

So even if 3-D printing is the future, it remains to be seen if Stratasys or 3D Systems will be the companies to shape that future. A single technological breakthrough may translate into an enduring competitive advantage and market dominance.

Stratasys, Ltd. (NASDAQ:SSYS)

Stratasys engages in the manufacture, development, marketing and servicing of rapid prototypin devices, including 3-D printers. Stratasys’ emphasis in the 3-D market is primarily on its industrial customers. On April 16, 2012, Stratasys announced that it intended to merge with Objet, a leading manufacturer of 3-D printers based in Rehovot, Israel, in a merger that has made Stratasys the single-largest player in the 3-D industry. Below is a table summarizing both the operating and tax synergies resulting from the merger.

Stratasys relies on its numerous value-added resellers, distributors, and a large commercial and industrial client base to drive profits. The company’s range of 120 3-D printing materials is the widest in the industry and includes more than 100 proprietary inkjet-based photopolymer materials and 10 proprietary FDM-based thermoplastic materials. Stratasys’ cheapest model is the $9,900 Mojo 3-D Printer, developed for the rapid industrial prototyping market.

3D Systems Corporation (NYSE:DDD)
On the other end of the spectrum is 3D Systems. The company’s top-line growth relies on a mix of mid- to high-end corporate customers in the medical and aerospace industry, and a corresponding expansion of the consumer print-on-demand space. The Cubify 3-D printing system is aimed directly at the mainstream DIY market, with an introductory price of only $1,299. 3D Systems offsets this lower entry price by raising the price of its proprietary ABS cartridges. 3D’s proprietary ABS CubeX cartridges are priced at $100 each, roughly twice the price of MakerBot’s spools. The sale of these materials currently accounts for 40% of 3D Systems’ revenue and is currently one of 3D Systems’ fastest-growing segments.


Source: 3D Systems Investor Relations.

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