T
he ‘buzz’ in 2012 that led to massive growth for 3D printing companies is now being stifled by OEMs moving into the market.
Time writer Kevin Kelleher says that 3D printing may follow a similar path to nanotechnology, which faded “because it wasn’t startups that brought it to market, but diversified giants like Intel and GE”, or solar energy, which is “requiring decade to become a mainstream product but that involves costly manufacturing plants along the way”.
He says that 3D printing’s path has taken it from a technology “used in industrial design” for quick prototyping to an innovation that generated a buzz as it was seen that “it could make customized shoes, empower DIY hobbyists, manufacture synthetic organs”. This led to stocks shooting up, with Stratasys’ stock surging 333 percent and 3D Systems’ by 800 percent over the two years since 2013.
Pundits even suggested that 3D Systems was “a better long-term investment than Facebook or Apple”, while other groups in the sector like ExOne and Voxeljet went public in 2013 and saw stock prices double from their offering prices. Yet “warning signs” appeared towards the end of 2013 that this upwards trend could not continue.
Most stocks have collapsed since early 2014, with Stratasys, 3D Systems, ExOne and VoxelJet losing between 71 percent and 80 percent of their market value in the past 17 months. Kelleher says the reasons for this “are nothing new to investors”, namely, that profits “can be hard to come by”, while revenue disappoints expectations, when investing early in upcoming innovations.
The writer continued by citing recent earnings reports from Stratasys and 3D Systems that suggest “things are getting worse rather than better in 2015”, with the former company advising its revenue will be lower than analysts expected for this year, while net income would similarly decrease. The Recycler reported on Stratasys’ 1Q2015 results, which indicated a $216 million (€192 million) loss, compared to a $4.1 million (€3.6 million) profit for the same period in 2014.
A few days later 3D Systems issued a similar forecast for disappointing revenue and profits. Both companies said “vague “macroeconomic” factors like higher oil prices and a strong dollar” were leading customers to cut back on capital spending.
Market analysts were no convinced, with Oppenheimer’s Holden Lewis writing: “3D Systems’ effort to explain the sharp pullback in unit demand was lacking, and Stratasys really doesn’t try.” Kelleher believes that the issue is not with 3D printing technology itself, “which proponents say is finally delivering on its potential and still holds enormous potential in the future”, but rather that it is proving difficult to establish a mainstream market.
The commentator gives the example of MakerBot, which was purchased by Stratasys in 2013 “to get a foothold in the consumer end” of the market, yet revenues dropped 18 percent in the last quarter as buyers have been slow. The Recycler reported in April 2015 that the company had been forced to lay off 20 percent of its staff and close three retail stores.
But the “bigger threat” is that “deeper-pocketed” competitors such as HP are now coming into the market, perhaps encouraging consumers to stall. Andrea James, VP and Senior Research Analyst at Dougherty & Co., commented: “Corporate buying managers are delaying purchases while they anticipate HP’s multi-jet fusion product in 2016.”
These “broader concerns” have caused stocks to dwindle for ExOne and Voxeljet as well, the writer claims, despite mixed earnings reports from Voxeljet in May 2015. Kelleher further says that “balancing the short-term demands of investors with technologies that take a long time to mature predictably leads to volatility” and that short of a turn around in the short-term future, we may some groups bought out by a large corporation like GE.
Nonetheless, there remains “plenty of potential” in the long-term value of 3D printing, just as there is in cleantech and nanotechnology, although this will “take time”, leaving “speculative investors who are characteristically short on patience [to] move on to the hottest new technology idea”.
The Recycler reported last month on a 3D printing entrepreneur who said 3D Systems and Stratasys’ slowdown was “directly tied to early entry assimilation in large companies”, while another analysis of the sector’s potential decline said customers are “behaving more rationally and conservatively in their purchasing decisions” and that “bets that the 3D printing market will recover for the second half may be a bit of a stretch”.