However, 3D Systems, according to Milunovich, who has a $62 price target on shares, has some kinks it needs to work out. The company has patents that are expiring this year, which the analyst feels could result in greater competition. There's also the question of the company's recent financial performance, with the December quarter showing expenses well above expectations, and flat earnings in 2014, as the company remains in investment mode.
2015 may be a better year, as Milunovich expects the company to generate $922 million in revenue, up from $513.4 million in 2013. As the company continues to get better operationally, along with the long-term goal of 30% organic revenue growth and 55% to 605% gross margins, 3D Systems may look better in the long-term than it does in the near term. "3D Systems might look worse than competitors near term but better long term as it emphasizes sales to aerospace, automotive, and healthcare," he wrote.
Comparatively speaking, Stratasys has better near-term visibility, and is likely to be less volatile, thanks in part to its MakerBot acquisition, announced in June 2013. Milunovich expects Stratasys, which he has a $125 price target on, to generate $674 million in sales in 2014, earning $2.18 a share on a non-GAAP basis. Though the MakerBot acquisition has gotten most of the attention, the company's acquisition of Objet, completed in late 2012, may prove to provide differentiation and a competitive advantage for Stratasys. "We think planned capacity expansion in Objet printers could add material leverage in 2015," Milunovich penned in the note.
That's not to say that MakerBot and Stratasys don't have their weaknesses. MakerBot sells more than half of its systems to professional engineers, despite being a consumer-facing company. The company is projecting sales to grow 70% year-over-year, but it could be doing more, as the consumer market takes off. There's also the lack of using metals for printing objects, though Milunovich notes "the company says it is not a priority."Though 3D Systems and Stratasys are two of the more dominant and well-known names in the 3D printing space, tech titan HP has made no bones about its eventual entry into the market. It's likely Palo Alto, Calif.-based HP focuses on the industrial market, as opposed to the consumer market, but it puts a rubber stamp on 3D printing, and legitimizes it as more than just science fiction and a hobbyist's dream. "HP's entry ratchets up competition but probably is a net positive in legitimizing and expanding the market."
--Written by Chris Ciaccia in New York >Contact by Email. Follow @Chris_Ciaccia
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV