But despite the long declines, the 3D printing industry is stronger than it seems, say industry analysts who track the field. As a group, the Machinery-Material Handling and Automation group that houses the stocks has climbed 20% in the past four weeks — outpacing all but 3 of the 197 industries tracked by IBD. Analyst consensus calls for powerful earnings rebounds for both 3D Systems and Stratasys this year and next.
And globally, 3D printing technology is being increasingly embraced by corporations, governments and universities.
“If you look at the industry through the lens of investors and share price, that will give you a distorted view of what’s happening in the 3D printer market,” said Terry Wohlers, president of Wohlers Associates, which provides technical, market and strategic analysis on the 3D printer market.
Industry Growing While Stocks Sag
The stock’s steep declines since 2014 really show what analysts often describe as the market getting ahead of itself. The 3D printer companies generated widespread excitement beginning around 2010 on the idea that their products represented an innovative leap in the manufacturing process. The media pounded home the view that 3D printers were the hottest invention since the laser. Investors bought the pitch, and the stocks of 3D Systems and Stratasys soared over a two-year period that ended as the companies began reporting earnings declines in 2013.
As the stocks unraveled, the promise of 3D printing also seemed to fade. Stratasys and 3D Systems were crushed as both continued to post disappointing earnings reports, quarter after quarter. Sales also began to decline on a year-over-year basis over the past two quarters, replacing the double-digit sales growth that had been the norm.
But this year, Wohlers thinks the market for 3D printers, including supplies, will grow 33% to $7.3 billion and will approach $10 billion in 2017. Consensus projections see significant sales upticks for both Stratasys and 3D Systems next year.
Investors also appear to be returning for another look. 3D Systems had climbed 136% as of Friday since marking its low on Jan. 20. Stratasys was up 60% on Friday from its January low.
Some analysts continue to sound a cautious tone on the two stocks, not fully convinced of a full-scale rebound. After Stratasys reported Q4 earnings, Cowen analyst Robert Stone said visibility was still limited, though he raised his price target on the company to 23 from 19. 3D Systems, after it reported Q4 earnings, said industry conditions remain challenging.
Wohlers says the long-term future of the technology is strong.
“When you look at what some of the biggest corporations and brands plan to do, and the investments made, there’s a tremendous amount of activity going on,” Wohlers said.
Off To A Running Start
One key 3D player is Nike (NKE). Two years ago, the athletics wear giant debuted football cleats made from 3D printers, and then showed off another set a year later. Nike said insights from the project “have revolutionized the way the company designs and manufactures footwear.” Its most recent creation from 3D printers is the Zoom Superfly Skyknit for sprinters.
Nike’s interest in 3D printers is accelerating. At a technology conference in October, Chief Operating Officer Eric Sprunk said the time is coming when consumers can log on to a Nike website to design their own shoe and have it made via 3D printing at a Nike store.
Footwear competitor Adidas is also in the game. In October, it announced Futurecraft 3D, an initiative it started with 3D printer company Materialise (MTLS) to create athletic-shoe midsoles tailored to an individual customer’s foot. The idea is that shoppers would enter an Adidas store, run briefly on a treadmill and quickly receive a printout of their footprint. An in-store 3D-printer would then serve up a midsole matching the customer’s exact contours and pressure points.
The 3D printers use liquid or powder materials and other chemical agents to “print” products by repeatedly depositing thin layers of material bonded together, layer by layer. The technology is increasingly used in aerospace, automotive, medical and consumer product fields, among many other industries. Parts can also be produced with various types of metals, using a different type of printing process — a laser-based method called laser sintering, or fusing.
Through 3D printing, robust and high-performing parts can be created at a fraction of the cost and time of traditional manufacturing methods. The technology first emerged about 25 years ago, but it only entered the mainstream after 3D Systems and Stratasys began to plumb the consumer market.
General Electric (GE) has made big investments in 3D printing, which it calls additive manufacturing. GE used 3D printers to develop complex fuel nozzles for its next-generation jet engine, known as Leading Edge Aviation Propulsion (LEAP), in a partnership with France-based Snecma.
The new fuel nozzles are at least five times more durable than the previously machined equivalent, according to the company’s website. The nozzle, once made with 18 parts that were melded together, is constructed using 3D printers into one part that is 25% lighter. GE says its use of additive manufacturing is groundbreaking, making it possible to produce components that were very difficult or impossible to produce using traditional technologies.
GE says will invest $3.5 billion in new equipment over the next five years to produce advanced components using additive manufacturing. The company says it has just begun to touch the surface of all the applications that additive manufacturing can provide and that it will revolutionize the way parts are made.
“There’s a tremendous amount of activity going on in the 3D printing market,” said Wohlers.
Heavyweight Competitors On Deck
This time last year, he said, there were 49 companies worldwide that made industrial-grade 3D printers, priced above $5,000. Today there are 86 or them. At price points below $5,000, there are options from hundreds of 3D printer companies, many of them based in China, he said.
The increase in competition is one of the reasons Stratasys and 3D Systems have struggled, Wohlers said. Another is the entry of HP Inc. (HPQ) into the 3D market. In October 2014, Hewlett-Packard — which later split into HP Inc. and Hewlett-Packard Enterprise (HPE) — said it would introduce 3D printers in 2016. The company said its printers will be faster, more efficient and cost less than products currently on the market.
“We know of companies that were planning to buy 3D printers but decided to wait for HP,” Wohlers said.
Many 3D printer companies are based in Europe. They include Germany-based EOS Manufacturing Solutions, one of the largest 3D printer companies with a wide range of 3D printers. Others are Voxeljet (VJET), SLM Solutions and Materialise — all three of which are also based in Germany — and Sweden-based Arcam.
Another competitor is U.S.-based ExOne (XONE), which primarily competes with companies that can produce parts made of metal. These companies include EOS, VoxelJet and Arcam.
Stratasys and 3D Systems have printers that primarily use resin or plastic-based materials, though both companies have expanded into the metals market, primarily through acquisitions.
Huge Reductions In Manufacturing Costs
Tasha Keeney is an analyst at ARK Investment Management, which manages four exchange traded funds and separately managed accounts with about $240 million in assets under management. She says 3D printers are a revolutionary platform that will have a major influence on manufacturing and production.
“We’re in the early days of 3D printing and expect a lot of surprises in this space,” said Keeney. “We expect to see 3D printing lead to new product designs and ideas, huge reductions in costs, weight declines and shorter supply chains.”
While 3D printing is a $5.5 billion market today, ARK projects it will reach more than $40 billion by 2020 — double Wohlers’ forecasts. Keeney estimates 3D printing has penetrated less than 1% of the addressable market.
Despite the increased competition, Keeney believes Stratasys and 3D Systems remain in a strong market position, both in terms of size and breadth of products.
As to what impact HP Inc. might have, she said, “we’re watching this closely for the time being, but we’re hearing mixed reviews.”