Is 3D Systems Stock A Buy?

3D Systems Corporation (NYSE:DDD) is a Rock Hill, South Carolina-based 3D printing company that pioneered stereolithography, and the STL format used industrywide. The company enables rapid prototyping, along with reduced costs, as additive manufacturing cuts down on shipping needs.

You believe in building the future, but is 3D Systems stock a Buy?

The company services a wide range of applications and industries. It has hardware, software, and on-demand manufacturing, along with a wide range of materials and logistics operations that service both polymer and metal components.

It’s happening slower than advocates wanted, but the 3D printing industry is growing. The total worldwide market brought in an estimated $17.5 billion in 2020 and another $21 billion is expected in 2021.

What is 3D Systems building and will it be additive to investors or melt their portfolios down?

3D Systems Has Over 1,000 Patents

3D Systems innovated 3D printing and additive manufacturing. It holds over 1000 patents related to the industry and is at the foundation of the additive manufacturing revolution.

To the average person, 3D printing just means using a desktop printer to create a plastic toy. While 3D Systems is certainly involved in that industry through its 2014 acquisition of Gentle Giants LTD, it’s much more.

Traditional manufacturing involves a subtractive process. You start with a block of stone, metal, or wood and chip away until it’s in the shape desired. That process creates a lot of waste, and the parts are expensive to ship across oceans.

Demand for more domestic products makes additive manufacturing a tempting proposal for many companies that import parts from overseas. This led to an overall boom in the 3D printing industry during the COVID-19 pandemic.

Consumers and workers may be staying home more than ever, but the need for finished goods still exists. This helped propel both 3D Systems’ revenues and DDD share price upward through the 2020s.

But that price surge has some investors wondering if they missed the boat on buying in.

Is 3D Systems Stock A Buy?

At the start of the year, 3D Systems had a market capitalization just over $1 billion. Astonishingly, DDD stock price since rose by nearly 500 percent within weeks. This put both it and competitor Proto Labs Inc (NYSE:PRLB) on a hot streak.

Share prices rose from a 52-week low of $4.60 to approach the $50.00 range by February. That’s more than a 1,000 percent increase to give it a $6 billion valuation. 

It started when the company sold its non-core software businesses Cimatron and GibbsCAM for $64 million, which pumped its Q4 2020 results up. Its preliminary financials showed over $170 million in revenue for the period, which greatly outperformed previous guidance under $140 million.

This pulled the company out of debt and reduced the need to sell stock and dilute shareholders. It also enabled an expansion of its metal and polymer printing capabilities.

On top of this, the company announced a breakthrough in bioprinting that could bring the technology to the human body. Bioprinting and regenerative medicine are advanced sciences straight out of a science fiction movie where human tissue cells are “printed” to create transplantable human organs.

That’s the mission anyway, and it’s just one many things pushing this industry up to astronomical levels. And that has bearish investors wary of the inherent risks of investing.

Will 3D Systems Stock Fall?

The company’s share price more than tripled in the first two months of 2020, and it’s hard to say how much higher it can go. While it does hold valuable patents, the company’s lawsuit against competitor Formlabs and Kickstarter is an indication it may be part of what’s stunting the industry’s growth.

And companies are increasingly bringing manufacturing in-house to reduce costs. Big tech giants like Apple, Microsoft, and Google, for example, are all working on their own chipmaking. Little, if anything, would stop them from buying their own 3D printers and building wafers from scratch.

Consumer interest in 3D printing fell over the years, and it’s only useful in enterprise applications. Of course, it’s very useful in those applications. And if the company’s bioprinting bet pay off, it will be a big win that justifies its valuation for investors.

But that’s a long road. Getting approval from the Food and Drug Administration and other regulatory agencies to implant a 3D printed organ is going to take a lot of time and money. But paying off its debts and shoring up cash could be a way for the company to signal it’s ready for that challenge.

That could be a transformative move that diversifies the company into the new foundation of American manufacturing. Of course, it also has rivals.

Proto Labs Takes Aim At 3D Systems

Proto Labs (PRLB), Formlabs, and other competitors are gunning for 3D Systems’ throne. This is in addition to larger companies like Lexmark, EOS, and Renishaw. Each company has its own 3D printers for a variety of industrial uses.

However, the company’s lack of debt and strong organic growth in its industrial and healthcare business units show it’s ready to meet these challenges.

The big question is which segment of 3D printing will be the big breakthrough. It’s also unclear how long it will take before that happens. But investors willing to wait it out for the long term could be rewarded in a big way for holding DDD.

Is 3D Systems Stock A Buy? The Bottom Line

Additive manufacturing and regenerative medicine are the future of industry, and 3D Systems has its hands in both pies. This American 3D printing company holds over 1000 related patents and can provide on-demand additive manufacturing for hundreds of materials.

This revolution is slow-moving though, and investors aren’t seeing the type of growth high-profile tech stocks tend to do. Of course, that was before 3D Systems started popping in January 2021. It’s been on a meteoric rise since, but some analysts believe it will pop soon enough.

Those willing to hold long enough could reap big rewards once again in the future. Expect a lot of volatility until then.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.