3D printing is not a new technology. It is the process of creating a three-dimensional object from a digital model. Originally, 3D printers were expensive and printed only single-color, low-quality plastic products. As the technology evolved, printing multiple colors in several materials, such as metal, ceramic, and carbon fiber became doable and printers fell in price.
Initially, few industries used 3D printing and then only for prototypes rather than final products. But 3D printing applications are increasing. For instance, rail maker Siemens is using 3D printing to print components. The healthcare industry is now using 3D printing extensively to print customized products like dental implants, for example. Even households are now using 3D printers to print toys, dishes, jewelry, etc.
According to Statista, the global 3D printing products and services market is expected to grow at a CAGR of 26.4% to surpass $40 billion by 2024.
The COVID-19 pandemic triggers the 3D printing revolution
The coronavirus pandemic sparked a 3D printing revolution as China’s manufacturing activity slumped, disrupting the global supply chain. As the pandemic threw everything out of gear, some basic products became unavailable. Many companies realized the need for distributed manufacturing. Hospitals that were falling short of supplies started printing personal protective equipment (PPE) and ventilators on 3D printers.
Individuals also started using 3D printing to make everyday household products, designs, and toys, thereby increasing the demand for 3D printers. However, the demand for 3D printing was weak in automotive and aerospace industries.
The pandemic-induced demand for 3D printers has seen the stocks of Petro Labs, Inc. (PRLB), Materialise NV (MTLS), and 3D Systems Corp. (DDD) surge by double-digits in 2020. As manufacturing recovers, the we think the technology could see strong demand from medical and non-medical applications.
Petro Labs, Inc. (PRLB)
Established in 1999, PRLB is a technology-enabled third-party manufacturer that provides traditional manufacturing and 3D printing services. It manufactures short-production-run parts, metal prototypes, and plastic products that are used in automotive, appliances, medical devices, and electronics markets. It has a market cap of nearly $5 billion and operates in Japan, the U.S., and Europe.
While PRLB’s third-quarter revenue declined 8.5% year-over-year because of the pandemic, it rose almost 1% sequentially. Its revenue declined because 3D printing accounts for just 15.1% of its revenue. A 2.5% increase in 3D printing revenue was more than offset by weakness in other segments.
As the economy recovers, traditional manufacturing will return. Moreover, the pandemic-induced 3D printing revolution is expected to drive greater adoption. Wall Street analysts expect PRLB’s EPS to grow at a CAGR of 25% over the next five years following increased uptake of 3D printing.
How does PRLB stack up for the POWR Ratings?
B for Trade Grade
B for Buy & Hold Grade
B for overall POWR Rating
The stock is also ranked #2 in the Technology – 3D Printing industry. PRLB’s price increased by 51.1% last year.
Materialise NV (MTLS)
Based in Belgium, MTLS was established in 1990. Unlike PRLB, MTLS is one of the largest pure-play 3D printing service providers. MTLS earns revenue through 3D printing software, 3D printing manufacturing services, and medical. Within the medical segment, it offers 3D printing software for medical applications, 3D printing medical services, and 3D-printing medical devices. Its stock price nearly tripled in 2020 as the pandemic gave a boost to 3D printing in medicine. It now has a market cap of around $4 billion.
For the third quarter, MTLS’s revenue fell 19.2% year-over-year. An11% growth in its medical segment was more than offset by a decline in software and manufacturing, especially in automotive and aerospace. The company has acquired Ditto and RS Print to move into the eyewear and footwear 3D printing market . As the economy recovers and demand returns in non-medical sectors, MTLS revenue should surge.
Wall Street analysts expect the company’s revenue to grow more than 6% in 2020 and nearly 12% in 2021. They expect its EPS to surge at a CAGR of 63.1% over the next five years as the world tries to return to normality after the pandemic.
We support that outlook with a Strong Buy in the POWR Ratings. MTLS has an “A” for Trade Grade, and Peer Grade, and a “B” for Buy & Hold Grade. It is rated above PRLB and is the top stock in the Technology – 3D Printing industry.
3D Systems Corp. (DDD)
DDD deals in everything related to 3D printing. It produces and sells 3D scanners, 3D printers, 3D printing material, and offers a 3D printing service. The company caters to the entertainment, aerospace, dental, healthcare, automotive and durable goods industries. It was established in 1986 and has a market cap of almost $3 billion.
In the third quarter, DDD’s revenue decreased by 13% year-over-year, but grew 20.6% sequentially. It has raised its fourth-quarter earnings guidance to $173 million from previous guidance of $140 million. It has also raised its non-GAAP operating income guidance to $15 million from $5.6 million. The fourth-quarter guidance has eyes rolling; it is based on an expectation that DD would eventually benefit from the pent-up demand for elective surgery, dental procedures, and industrial activity.
DDD’s stock price doubled on January 7. J.P. Morgan analyst Paul Coster gives some credit to the new CEO Jeffrey Graves, who has restructured DDD. Many 3D printing companies, including DDD, were plagued by too many non-core businesses. But, recently, DDD sold non-core software businesses Cimatron and GibbsCAM for $64 million of which it used $21 million to reduce its debt.
As manufacturing recovers and 3D printing starts gaining ground, DDD could see a comeback in growth. Hence, Wall Street analysts expect its EPS to grow at a 10% CAGR over the next five years.
DDD has a “Buy” rating in our POWR Rating system. It also has an “A” for Trade Grade. In the six-stock Technology – 3D Printing industry, it is ranked after PRLB at #3. Since 2020, the stock price has increased by around 20% to $23.53.
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PRLB shares were trading at $182.19 per share on Monday afternoon, down $3.52 (-1.90%). Year-to-date, PRLB has gained 18.77%, versus a 1.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Puja Tayal
Puja is a seasoned writer working with financial publishing companies like Motley Fool Canada and Market Realist. With over 13 years of experience in the field of fundamental research, she brings a blend of comprehensive, well-researched insights into her articles. More...
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