Time to invest in 3-D printing?

Low-cost 'printing' technology is ushering in a revolution in manufacturing, advocates say, as machines produce tangible objects from malleable materials.

By TheStreet Staff Oct 26, 2012 5:51PM

A 3D Systems printer © David Paul Morris/Bloomberg via Getty ImagesBy Dana Blackenhorn

 

When I want to really feel young, I look at the 3-D printing space. There's a 1976 feel to the industry.

  • Shapeways just got New York City Mayor Michael Bloomberg out to cut a ribbon on its 25,000-square-foot "factory of the future," hoping to create five million new products a year.
  • A series of 3-D Print Shows offer an early Comdex gleam against the MakerFaire's West Coast Computer Faire vibe.

The dead hair follicles on the top of my head tingle just thinking about it. But can you make money at it? Is there an Apple (AAPL) hiding in this stack of start-ups, or will these companies, like Digital Equipment, Cromemco and Kaypro before them, be shooting stars that die out?

 

You might be tempted to grab some Hewlett-Packard (HPQ) shares, recalling a DesignJet 3-D printer you saw somewhere, once upon a time. This would be a mistake. That printer was a private-labelled Stratasys (SSYS) device, and HP ended its relationship with Stratasys last summer.

 

Stratasys may turn out to be the HP of this space. Its shares are up 125% this year. Sales are up 50% since 2009 and could top $200 million for the full year. And the Eden Prairie, Minn., company is profitable. 


Among its products is a line of Fused Deposition Modeling, or FDM, printers that have a nozzle used to melt plastic wire and deposits the material according to CAD (computer aided design) input.

 

The early days

FDM is just one of many types of 3-D printers. Since 3-D printers make objects, the one you choose will depend on the material you are using, the accuracy you require and your budget.

 

3D Systems (DDD) has done even better than Stratasys -- maybe it will be the IBM (IBM) of this space. Shares are up 182% since January. The Rock Hill, S.C., company had $230 million in sales last year and could easily top $300 million in sales this year. The margins are also fatter than those of Stratesys. The company started taking on debt in 2011, but it's less than 25% of assets, still very manageable.

 

There are 3-D printers using a variety of materials, and a variety of technologies, divided into personal, professional and production lines, roughly equivalent to desktops, servers and mainframes. The biggest make objects up to 20 inches by 15 inches by 9 inches in size, and can be used to make wax casts, dental implants, medical devices and other things.

 

The oldest of the big 3-D companies is Autodesk (ADSK), which deploys CAD software to create many of the digital files upon which 3-D printers draw. 

 

As a long-time software company, Autodesk has a lot of customers beyond 3-D printing, and is thus relatively mature. Sales are over $2 billion a year, with almost 15% of that coming to the bottom line in normal years. Last year, Autodesk bought T-Splines, a maker of 3-D modeling software, to strengthen its digital prototyping offerings.

 

Two prime 3-D printing plays sell on the pink sheets. Dassault Systems, a French company, is a diversified engineering software firm that created SolidWorks, a major 3-D modeling package. Organovo, headquartered in San Diego, is focused on a medical niche, which is red-hot because nearly all medical parts are custom-made.

 

The most important point to remember is that these are early days. Students of history will note how many of 1976's PC makers are still vital today -- I can count them on one finger. (It's Apple.) There will be many twists and turns on the way toward custom manufacturing, one-at-a-time production of products by machines following software, creating millions of clean jobs worth big paychecks.

 

Heck, the real Apple here may not even be public. That would be MakerBot, a privately held producer of consumer-oriented 3-D printers (based in Brooklyn, N.Y.) under the MakerBot and Replicator names, and producers of Thingiverse, a 3-D design house.

 

Very cool.

 

At the time of publication, the author had a position in AAPL.

 

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