Shares of 3D Systems (DDD, Financial) have been battered in recent weeks. The momentum favorite is now down almost 25% even while the market has rallied in September.
The question is whether the weakness will continue or are long term investors getting an attractive entry point?
First, if you are unfamiliar with what 3D printers can print, you'll want to first see some examples.
3D printing is one of the most hyped technologies on the market, despite the fact that there is little consumer penetration. The thinking is that one day, we'll be able to print most physical objects using an ABS plastic. 3D printers are primarily used by designers looking to prototype a design for a manufacturing company.
One key question mark with the company is whether competitive pressures will erode margins. There are several private 3D printing companies including Asiga, Buildatron and Essential Dynamics. In addition, it appears that a new competitor lists a product on Kickstarter every week.
However, these are all smaller companies that would have to create some fantastic innovation in order to know DDD off its dominant market position. The real threat is most likely HP Computer (HPQ), a company that is looking to jumpstart growth in a stagnant hardware market.
In addition, I do not believe that 3D printing is going to be a big hit in individual homes. Rather, products will be printed using high-end 3D printers that will exist at companies like Amazon.com. The product will be shipped and delivered usually on the same day. With an extensive patent portfolio, it is likely that DDD will be the company supporting the large cloud-based ecommerce companies.
Valuation still appears to be extended as the company is expected to earn between $1.25 and $1.33 next year. However, the growth rate of 14.4% over the last five years shows that DDD is positioned to weather some volatility in the next few years.
One red flag with the stock is the level of insider selling. One officer sold over 13 million shares near the stock peak at $43. That is an enormous sale when you consider that the company only has a market cap of $1.9 billion.
The question is whether the weakness will continue or are long term investors getting an attractive entry point?
First, if you are unfamiliar with what 3D printers can print, you'll want to first see some examples.
3D printing is one of the most hyped technologies on the market, despite the fact that there is little consumer penetration. The thinking is that one day, we'll be able to print most physical objects using an ABS plastic. 3D printers are primarily used by designers looking to prototype a design for a manufacturing company.
One key question mark with the company is whether competitive pressures will erode margins. There are several private 3D printing companies including Asiga, Buildatron and Essential Dynamics. In addition, it appears that a new competitor lists a product on Kickstarter every week.
However, these are all smaller companies that would have to create some fantastic innovation in order to know DDD off its dominant market position. The real threat is most likely HP Computer (HPQ), a company that is looking to jumpstart growth in a stagnant hardware market.
In addition, I do not believe that 3D printing is going to be a big hit in individual homes. Rather, products will be printed using high-end 3D printers that will exist at companies like Amazon.com. The product will be shipped and delivered usually on the same day. With an extensive patent portfolio, it is likely that DDD will be the company supporting the large cloud-based ecommerce companies.
Valuation still appears to be extended as the company is expected to earn between $1.25 and $1.33 next year. However, the growth rate of 14.4% over the last five years shows that DDD is positioned to weather some volatility in the next few years.
One red flag with the stock is the level of insider selling. One officer sold over 13 million shares near the stock peak at $43. That is an enormous sale when you consider that the company only has a market cap of $1.9 billion.
