Given the explosion in awareness, it’s no surprise that investors have been eager to support 3D printing leaders like 3D Systems (DDD) and Stratasys (SSYS). However, in a recent research report Canaccord Genuity says that in the next year the 3D printing field will get more competitive and complex, making investing in the tech trickier than it was in 2013.
According to the report three, key factors should guide individuals looking to invest in 3D printing: supply chain complexity, divergent service bureau business models and metal printing processes.
On the supply chain front, Canaccord believes 3D Systems’ string of acquisitions has diversified the firm to such a degree that its biggest competitor Stratasys has been forced into a position of consolidation.
“We note that DDD historically traded at a 10-20% discount to SSYS. That discount was not only erased in 2013, it flipped on its head, at least temporarily. Following the merger of SSYS with Objet in 2012 and the acquisition of MakerBot this year, investors now expect SSYS to make an acquisition in the metal arena. This is not only to access new growth verticals; we believe there is concern that inaction will only lead to more expensive acquisitions in the future.”
The Canaccord report continues, “On the subject of a metal acquisition, we expect SSYS to consider differentiated suppliers like Optomec (3D printed antenna among other things) and avoid more commoditized laser sintering companies. Meanwhile, Swedish-based metals printer supplier Arcam has begun to consolidate beyond its core business. In December, Arcam announced its intent to acquire metal powder supplier AP&C in order to guarantee materials supply to its machine customers as those customers prepare to ramp volume production of aerospace and medical applications.”
When it comes to 3D printing service bureaus, the Canadian financial firm believes that larger ventures might see their own IPOs sometime this year.
“Originally focused on SLA and later FDM machines used in the prototyping process, service bureaus have evolved to include metal capable DMLS machines and other processes. They also can go beyond printing jobs for customers to help in process and materials selection, and non-AM conventional manufacturing steps. Thus far, the only exposure to publicly traded service bureaus has come from the fact that DDD and SSYS each have significantly large service bureau revenue streams, through Quickparts and Redeye, respectively. We expect that to change in 2014 with the potential IPOs of pure play service bureaus.”
“While DMLS from EOS is the dominant process, we note that Arcam is the only stand-alone public metal AM company. We believe additional analyst coverage of Arcam is coming in 2014 as well as IPOs of laser based metal players also based in Europe. Similar to Arcam, we expect metal machine suppliers to focus primarily on titanium parts for aerospace and orthopedic implant customers. We note that DDD has metal capability through its Phenix s Systems acquisition, while SSYS will likely also acquire the technology rather than build it in house.
With increased interest and investment, 3D printing firms could be on the cusp of major gains in the new year. For investors, choosing where to invest in 3D printing could become a bit murkier, but with proper guidance this revolutionary technology could be quite profitable.
Images Courtesy of 3T RPD & 3D Systems