3D Printing Stocks: How Are They Looking in 2017?

Investing in 3D printing stocks was previously a risky business. Media, investor and company hype began driving stock prices to unreasonable rates that exceeded well beyond some firms’ P/E ratios. In turn, many investors were in for a rude awakening when the bubble burst and some of these stocks came tumbling down in 2014.

How is the industry doing today? Let’s take a look at the most recent financials from most of the major firms.

3D Systems

After big changes in management and strategy over the past year or so, 3D Systems (NYSE: DDD) seems to be doing well from a revenue standpoint. This is, in turn, reflected by investor confidence in the company’s stock. In the wake of the consumer 3D printing implosion of 2014, 3D Systems shuttered its consumer 3D printing division and replaced its CEO with former HP Vice President Vyomesh Joshi.

The company has just posted its Q4 2016 and FY2016 financial results and, despite a slight revenue drop compared to last year, 3D Systems remains steady. In 2015, it posted revenue of $666.2 million, but has decreased 5 percent to $633.0 million this year. Nevertheless, its Q4 revenue has grown $5.1 million from Q3, bringing its revenue up to $165.9 million from $156.3 million.

Investors have slowly been regaining confidence in the company. After the stock reached a rock bottom of $7 per share at the beginning of 2016, as of this writing, it has gradually climbed up to $15.37 in response to 3D Systems’ financial results.

The company anticipates revenue growth of 2 percent to 8 percent with revenue from $643 million to $684 million in 2017, with GAAP earnings per share ranging from $0.02 to $0.06 and non-GAAP ranging from $0.51 to $0.55 with positive cash flow from operations.

Stratasys

3D printing’s other stalwart, Stratasys (NASDAQ: SSYS), has yet to release its latest financial results, but a lot can be gleaned from its Q3 2016 results . Revenue dropped from $167.6 million Q3 in 2015 to $157.2 million in 2016. The company also posted a GAAP net loss of $20.8 million.

Replicator+ 3D printerDespite the release of the , MakerBot’s total sales dropped by 29 percent compared to the previous year, with 3D printer sales in general falling by 20 percent. Materials, however, increased by 12 percent and customer support also went up by 7 percent.

With the company slumping somewhat after the 2014 bubble, like 3D Systems, Stratasys ultimately replaced its CEO in June 2016, taking on Ilan Levin, a member of the board and executive committee of Stratasys, in his place. After it posted these financial results, MakerBot, too, replaced its CEO with MakerBot president, Nadav Goshen. A month later, the desktop 3D printer subsidiary laid off about a third of its staff, marking the fourth time in two years that MakerBot had performed a large layoff.

Revenue guidance was dropped to a range of $662 to $673 million from previous estimates of $700–$730 million. Therefore, when 2016 financials are released, they may fall short of those earlier, higher estimates. Whether or not the change in leadership will make it possible to steer Stratasys in the right direction is difficult to determine. Whereas 3D Systems looked to a successful leader in the tech world to take over the reins, Stratasys looked within for its leadership change. In time, we may be able to understand if either move proved more successful.

Stratasys stock has remained in the low to mid $20 per share range since late 2015 and is trading at $20.15 as of this writing.

Materialise

Materialise (NASDAQ: MTLS) has demonstrated steady revenue growth since it went public in the summer of 2014. Results in 2016 were no different. The company’s Q4 revenue increased by EUR€31.5 million (USD$33 million), an increase of 12.3 percent from Q4 2015. This brings the total revenue for the year to EUR€114.5 million (USD$120.9 million), a 12 percent increase from 2015. Materialise anticipates revenue of between EUR€128 and EUR€134 million ($USD135 million to 141.6 million) for 2017.

The company is broken up into three segments: Materialise Manufacturing, Software and Medical. Materialise described its Manufacturing segment performing the best over a one-year period. Whereas software increased 10.6 percent from EUR€7.3 million (USD$7.7 million) to EUR€8.1 million (USD$8.5 million) and Medical increased 5.1 percent from EUR€9.6 million (USD$10.1 million) to EUR€10.1 million (USD$10.6 million), Manufacturing increased 19.4 percent from EUR€11.2 million (USD$11.8 million) to EUR€13.3 million (USD$14.0 million).

Peter Leys, chairman of Materialise, concluded, “The additive manufacturing market continues to evolve, particularly in the direction of end part production, and we intend to continue positioning Materialise to benefit from this promising growth market in the coming years. Our strategic priorities for 2017 are to sustain our leadership position in software through continued innovation and strategic partnerships; to drive the next stage of growth in our medical division through our focus on the hospital market; to continue increasing our manufacturing of end parts; and to enable the development of additive manufacturing in specific vertical markets. We anticipate delivering sales and adjusted EBITDA margin expansion in 2017 while reinvesting efficiency gains in selected business development initiatives.”

The stock price for Materialise has dropped significantly since the company’s IPO, but may be starting to climb from its low of $5.80 per share. It is trading at $8.79 per share as of this writing.

Arcam

Arcam (STO: ARCM) is unique in that GE Aviation acquired controlling shares in the manufacturer of electron beam melting (EBM) machines at the end of 2016. This caused the company’s stock to skyrocket last fall to beyond 300 Swedish krona (about USD$33) per share. Since then, Arcam’s stock has remained at those levels or higher, jumping to 355 SEK per share at the end of February. It is currently trading at 335.00 SEK at the time of this writing.

Outside of the news regarding GE, Arcam reported revenue growth, with Q4 revenue growing 18.2 percent to 208.1 million SEK (USD$22.9 million) from Q3. For 2016 as a whole, the company grew 12.5 percent, from 576.1 million SEK (USD$63.76 million) in 2015 to 648.3 million SEK (USD$ 71.76 million) in 2016. At the same time, the company reported a negative operating income due to nonrecurring costs of 44.8 million SEK in Q4.

Machine sales were similar to the previous year, with Arcam delivering 50 EBM systems in 2015 and in 2016, but the number of orders dropped somewhat with the company receiving 48 orders in 2016, compared to 58 in 2015. Arcam’s orthopedic manufacturing subsidiary, DiSanto, was described as hindering the company’s financials, as 3D-printed implants have been unable to offset the decrease in revenue related to traditionally made implants. AP&C, Arcam’s materials subsidiary, however, continued to perform well, according to the company, and added three reactors to the five already present at its Montreal facility. AP&C will also be building a new powder manufacturing facility outside of Montreal.

SLM Solutions

Speaking of GE, SLM Solutions (ETR: AM3D) was originally on the table for an acquisition by GE Aviation, but after activist investor Peter Singer’s Elliott Management Corporation bought shares of the company and held out for a better offer, GE went after privately owned Concept Laser instead. How did the non-deal affect the company?

After initial news of the possible deal went out last summer, SLM stock jumped dramatically to a high of EUR€42.51 (USD$44.84), but tumbled down to EUR€29.40 (USD$31.01) per share when GE announced that it would purchase a controlling share in Concept Laser instead. It has slowly been on the path to recovery since then with the stock price still maintaining a level much higher than it was before the GE negotiations began. At the time of this writing, it was trading at EUR€38.46 (USD$40.57).

While the company’s complete financials will be released on March 30, SLM Solutions put out some preliminary findings, including a 22 percent increase in consolidated revenue, increasing from EUR€66.1 million (USD$69.7 million) to EUR€80.7 million (USD$85.1 million), which beat December’s reduced revenue forecast of EUR€75 million (USD$79.1 million) to EUR€80 million (USD$84.4 million). The overwhelming majority of this increase was from machine sales (86.3 percent in 2016 compared to 89.5 percent in 2015), while after-sales services and parts accounted for 13.7 percent, compared to 10.5 percent in 2015. The company received 130 orders in 2016, totaling EUR€80 million (USD$84.4 million). This beats 2015’s intake of 102, totaling EUR€61.1 million (USD$64.5 million).

Despite increased revenue, the company stated that its 2016 performance fell short of expectations. Perhaps it was this, along with the botched GE deal, that caused SLM Solutions to replace its former CEO, Markus Rechlin, this January. The former CFO, Uwe Bogershausen, has taken over.

Proto Labs

Proto Labs (NYSE: PRLB) revenue was down in Q4 2016 at $72.4 million, in comparison to $73.8 million the same quarter in 2015, but total revenue was up by 12.9 percent, $298.1 million in 2016 versus $264.1 million in 2015.

3D printing is still just a fraction of the company’s business, with its injection molding business bringing in $41.6 million in revenue and CNC machining taking in $20.9 million. 3D printing accounted for $9.8 million during Q4 2016 compared, an 8 percent increase from Q4 2015. However, it is growing more quickly than injection molding (5.2% decrease in revenue from 2015) and CNC machining (6.7% increase in revenue from 2015) in part due to the 2015 acquisition of German 3D printing firm Alphaform.

Vicki Holt, president and chief executive officer of Proto Labs, echoed as much, “3D printing revenue growth remained healthy and we look for continued strong growth in this segment. From an operational standpoint, we achieved several important milestones during 2016 that have strengthened our competitive position and enhanced our ability to generate improved top and bottom line growth across all our businesses going forward. They include strengthening the management team, integrating our acquisition in Germany to enhance our 3D printing operations in Europe, the successful launch of overmolding and the expansion of our Liquid Silicone Rubber and lathe offerings, and the expansion to new manufacturing facilities in North Carolina and Japan. During 2017, we will be building on these initiatives to drive additional revenue growth.”

In 2017, the company will work to improve sales and marketing, expand its service portfolio, and improve its gross margin to hit a revenue increase of between 58 and 60 percent for 2017. Proto Labs’ Board of Directors also authorized a repurchase of up to $50 million of the company’s common stock, which will be issued either on the open market or privately at the behest of the company’s management.

The company’s stock is currently trading at $56.30 as of this writing, and, overall, has been quite volatile. Or, as my father-in-law would put it, “It’s been seeing a lot of action.” The diversity of services offered by Proto Labs may help ensure that the company can survive a possible bubble associated with new, hyped technology. After all, its stock did not suffer from the 2014 implosion.

HP Inc.

HP Inc. (NYSE: HPQ) is another unique part of the 3D printing industry. As a tech giant, 3D printing represents only a small part of the firm’s offerings, which also includes the company’s PC and printer businesses. Additionally, the HP Inc. entity is the result of a split made to the Hewlett-Packard Company in 2015, which saw its IT products brought under Hewlett-Packard Enterprise, while printers and PCs were taken over by HP Inc.

The company put out its FY2016 results last November, reporting a 6 percent decrease in GAAP net revenue, dropping from $51.5 billion in 2015 to $48.2 billion in 2016. However, HP Inc. has since released its Q1 2017 earnings and has stated that net revenue is up 4 percent from the same period last year at $12.7 billion.

HP Inc. only began shipping its 3D printers last year and has not yet released any financial information related to that aspect of the business separately from other numbers. Therefore, it’s difficult to tell how it may be impacting the company’s performance.

The company’s stock dropped dramatically after the split in November 2015 and has slowly been climbing back up since. As of this writing, it is $17.62 per share. In an effort to save money over jobs, both HP Inc. and HP Enterprises laid off numerous employees during the split and after with a goal of reducing its workforce by 3,000 to 4,000 employees over a three-year period. As opposed to what happens in a co-op like the Mondragon Corporation, where employees are shifted around various smaller co-op subsidiaries as needs dictate, these workers will have to look for work elsewhere.

ExOne

ExOne (NASDAQ: XONE) has yet to release its financial results from 2016, but it has made some changes to its business after failing to generate profit. This is despite increasing revenue reported last year, when the company’s revenue increased by 47 percent in Q3 to $13 million and 38 percent in Q2 to $11.8 million compared to the same quarters in 2015.

Since then, ExOne has reported that it will “refocus how it demonstrates and provides its industrial sand core and mold binder jet 3D printing services in North America.” Its production service centers in Troy, Mich., and Houston, Tex., will become ExOne Adoption Centers (EACs) to include more machines and materials. It will also create regionally based material development services and expand training and technical services within the EACs. Operations from its facility in North Las Vegas, Nev., will be consolidated into the EAC locations, while the company’s Chesterfield, Mich., specialty machining operation will be closed, which may result in job losses.

The company will be attempting to address the adoption of its sand 3D printing capabilities, stating that the technology is seeing increased adoption in North America. These EACs will then be leveraged to support the technology on the continent. ExOne CEO Jim McCarley explained, "At ExOne, our goal is to rapidly and effectively accelerate the adoption rate of binder jet printing, which we believe will in turn expand our addressable market. The actions announced today are the first steps in building a structure that will be better equipped to demonstrate our latest advancements in binders and materials, provide more robust training services and allow us to interact more closely with our customers and their applications of binder jet printing."

ExOne’s stock has struggled to recover from the 3D printing boom, hovering around the $10 mark for the better part of a year. At the time of this writing, it was trading at $10.21 per share.

Voxeljet

Voxeljet (NYSE: VJET) also hasn’t yet released its 2016 financial results, but in Q3 2016, it generated EUR€4.9 million (USD$5.2 million), a 4 percent increase from Q3 2015’s EUR€4.7 million ($USD 5.0 million). The company’s gross profit margin also increased from 32.7 percent in Q3 2015 to 41.1 percent in 2016.

Systems revenue went up 74.5 percent from EUR€1.5 million ($USD 1.6 million) to EUR€2.5 million (USD$2.7 million) due to the sale of three massive VX4000 industrial 3D printers. While the sale of 3D printers represented 52.1 percent of total revenues, in contrast 31 percent last year, the company’s services division dropped 27.7 percent during the same one-year period from EUR€2.3 million (USD$2.5 million) from EUR€3.2 million last year (USD$3.4 million).

As a result of its overall performance, voxeljet lowered its revenue guidance for the year from a range of EUR€24 to EUR€25 million (USD$2.5 to $2.6 million) to a range of EUR€22 to 24 million (USD$2.3 to $2.5 million).

Voxeljet has also performed poorly since the bubble burst. It was trading at $2.98 at the time of this writing.

Takeaways

Now that the peak of inflated expectations is over, as Gartner would put it, are we beginning to climb out of the trough of disillusionment and heading to the plateau of productivity? It’s difficult to say. Gartner’s 2015 Hype Cycle chart indicated that many practical applications were progressing toward productive use and development. In 2016, the market research firm did away with the “Industrial 3D Printing” category and lumped it in with “Enterprise 3D Printing,” which may indicate progress on that front, too.

What does that mean for 3D printing stocks? We could have more stalwart companies on the horizon, which, when they fully mature in the future, could be steady sources of investment and dividends. The technology is still young, but it is becoming increasingly integrated into the mainstream manufacturing supply chain as giants like GE and HP have entered the market. As employees are subject to the “refocusing” of businesses, the industry itself will become more stable and more profitable.

Disclosure: Author owns minor shares in 3D Systems, Stratasys and Materialise.