It seems that every day, an article comes out proving 3D printing is the future. 3D-printed cars are now a thing, and 3D-printed homes have also made some headlines. On a much smaller scale, printing at home has also netted some interesting results, such as phone cases and toys for the kids.
The hype is huge, and tech enthusiasts love seeing what's possible. However, investing in the companies behind the 3D printers is a lot trickier and not for the faint of heart.
Here's why the hype doesn't exactly translate to success on Wall Street, although there are some promising signs for investors willing to take the plunge.
The Bursting Bubble
With all the hype and interest surrounding 3D printers, some say it's too late to get into the game now. When 3D printing entered the mainstream, the Economist boldly stated back in 2012 that it's the third industrial revolution. Investors piled on at the time, and a number of stocks skyrocketed. Since then, things have cooled off, and prices have fallen to almost crash levels.
3D Systems Corporation (DDD) - Get Report , one of the earlier publicly traded companies in the industry, reached heights of nearly $100 in early 2014. Now the company trades at a meager $11.50. Likewise, competitor Stratasys (SSYS) - Get Report climbed to more than $135 at that time before losing 75% of its value. It now trades at $29. Those are brutal numbers for investors who got in at the height of the bubble.
Despite the volatility of 3D-printing stocks, many retail investors are locked in for the long term as they expect 3D printing to become ubiquitous. Despite the headlines, 3D printing is still a niche process that might not fully take off for years. Waiting isn't easy, especially when the industry is plagued with volatility. This industry has quietly been around for decades before making headlines, and it remains to be seen if 3D printers will take off on a large scale.
The Fad Factor
People bearish on 3D printing go so far as to call it a fad. The so-called 3D-printing revolution that was announced a couple years ago didn't happen on a large scale, so these bears seem to think they're right. There might be some truth to their thoughts, but it seems like 3D printing was simply anointed too early. Calling it a fad is misleading, as the industry is poised to be around for a long, long time as more uses are discovered for it.
A 3D printer might never become a household item, but it does have a number of industrial and business uses. How well that translates into success for investors remains to be seen, but there are some promising companies out there that are worth looking at:
Autodesk is the gold standard in software for engineers and architects, and it's continued to pivot its software for 3D printers. The company even got into the 3D-printing hardware market with its open-source Ember printer. The decision to go open-source benefits the industry as a whole, but it will also expand the company's share of the market. Autodesk is diversified beyond its foray into 3D printing, so it doesn't suffer from the volatility of other companies. This is one of the few companies involved in 3D printing that has actually increased in value since the industry highs of 2014.
ExOne had the short-term benefit of going public a year before the height of the 3D-printing bubble and has seen its market cap drop 83% from that high to just 170 million now. This industrial 3D-printer company is losing money but plans to offer more flexible financing to its customers in order to move more products out the door. Industrial 3D printing is more promising at the moment than household printers, so ExOne is in a good position to grow.
Stratasys is one of those companies that saw a huge run-up before bursting down to its lowest levels since 2008. The stock is stabilizing, and its latest earnings show some positive signs despite lower guidance for the next quarter.
The Future of 3D Printing
It takes a strong will to invest in 3D printing, especially after the steep drop in prices in 2014. Despite the highest of highs and the lowest of lows, 3D printing is probably here to stay and can pay off for prudent investors.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.