Why 3D Printing Is Here to Stay

Updated from 9:07 a.m. to include more analysis in the ninth paragraph.

NEW YORK (TheStreet) -- The hype surrounding 3-D printing is enormous, given the implications for the manufacturing, retail, and technology industries. With HP (HPQ) reportedly set to enter the market later this year, not only could we begin to see increased interest in the market, but a validation, as well.

UBS analyst Steve Milunovich has initiated coverage on the sector, putting a "neutral" rating on 3D Systems (DDD) and a "buy" rating on Stratasys (SSYS). Milunovich notes that 3D printing "is disruptive and part of the unscaling trend," building objects layer by layer. Milunovich believes that 3D printing truly has disruptive potential, as it changes facets of the manufacturing business, from aerospace companies using it for airplane parts, to consumers making toys and clothes. When combined with cloud services for additional measures, "3D printing is part of an 'unscaling' trend shifting power from mass to customized production."

The 3D printing market is still in its early stages, with Milunovich noting it's growing "at least" 20% to 25% annually, as it moves beyond the initial hobbyist and early adopter stages, into a much greater market segment. Terry Wohlers, an industry consultant for the 3D printing market, notes the market could reach $4 billion in 2015, up from $2.2 billion last year, and potentially reach $8 billion in revenue in 2019. Despite companies like Brooklyn-based MakerBot (owned by Stratasys) focusing on the home market, and trying to drive consumer adoption, the biggest opportunities, Milunovich notes, are in the enterprise. He notes that around 25% to 30% industry revenue is from actual printer sales, with the rest from materials and services.

Shares of 3D Systems were active in pre-market trading, up 1.4% to $59.97, while Stratasys was not. Shares of Stratasys closed yesterday at $106.09.

The benefits of 3D printing are enormous, including cutting down on the complexity of the manufacturing process and the skills required for actual assembly or manufacturing the parts.  3D printing also provides the ability to use various materials to build products, such as ceramics, carbon, and other high-density elements, to form sturdy parts. "Aerospace, automotive, healthcare, machines tools, and fashion are large market opportunities," Milunovich stated in the note.

Companies like 3D Systems and Stratsys have been the early leaders in the space, and the market has reflected that in their stock prices. Shares of 3D Systems and Stratsys are up 83.5% and 42.9% over the past year, respectively.

DDD ChartDDD data by YCharts

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