Shares of almost all 3D printing companies have appreciated considerably this year. Even though analysts are expecting 3D printing to be worth more than $5 billion by 2018, I don't think investing in 3D printing companies, mainly 3D Systems (NYSE:DDD), is a good idea. Investors have bid up 3D printing stocks in the hope that its technology will revolutionize the industrial manufacturing process and it will also have a massive presence in the consumer segment. However, given the flaws of the technology, I think investors would be better off shorting 3D printing stocks like 3D Systems, Stratasys (NASDAQ:SSYS), Voxeljet (NYSE:VJET), ExOne (NASDAQ:XONE) and Organovo (ONVO).
Why 3D printing Is Overhyped
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- ONVO 15-Year Financial Data
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As I already said, investors have bid up 3D printing in the hope that it will revolutionize industrial printing and also that 3D printers will become an everyday household object in the future, but I don't see this happening anytime soon. Here's why.
Of course, there are many things you can make with the help of a 3D printer, but people seem to ignore the fact that they will need a very expensive high-end 3D printer, which use resins or lasers, to print these objects. Many people blindly believe that they will be able to manufacture a range of products on a low-end printer (which costs roughly $800), which is definitely not true.
As of now, 3D printers can only print in plastic, resins and certain metals. These printers are not capable of printing products in mixed materials and the majority of the products that are used today are manufactured by a combination of materials, and this adds to the limitations of 3D printing.
3D printing is not a user-friendly process and you will need a CAD model to print any desired product. And it goes without saying that you will need to learn how CAD works in order to make a model and mastering the program can take years. Therefore, it is certainly not rational to assume that 3D printers will become an everyday household item in the future.
3D printers use layer-by-layer technique for manufacturing an object, which ensures homogeneous strength. The product which has been manufactured may look exactly the way you wanted it and will have uniform strength throughout, but it will be weaker than the traditionally manufactured products.
Why I'm Changing my stance on Organovo
I have to admit that I was sucked into the 3D printing bandwagon by Organovo as I have recommended buying this stock two times in the past. However, I'm changing my stance now
Organovo's exVive3D Human Liver Tissues were developed to save big pharmaceutical companies a lot of cash. Big pharmaceutical companies spend billions of dollars in bringing a new medicine into the market that eventually fail due to undetected liver toxicity. Organovo states that its liver tissues identify these toxicities sooner, saving the pharmaceutical companies a lot of cash.
While this sounds nice, in a recent letter to the shareholders Organovo's CEO Keith Murphy didn't mention the financial impact the liver assays will have on the company. Instead, he outlined the benefits of an expanded strategic focus in order to drive long-term value creation. The liver assays have been out for over four months now, and the fact that Organovo's CEO didn't mention its financial impact and is instead trying to distract investors along new business lines indicates that the liver assays may be a flop. Note that exVive3D Human Liver Tissues is the company's only product, and prior to its launch, it was expected to rake in millions of dollars in revenue. Hence, its absence from the letter is suspicious, and I doubt that it can produce substantial revenue.
The company has been diluting shares are a hectic pace. With overheads increasing over the last few months, investors can expect another secondary offering in the future. Hence, I think the stock is a short.
Due to the reasons mentioned above, I am confident that 3D printing will not live up to the hype. Hence, I would recommend investors to short 3D Systems, Stratasys, Voxeljet, ExOne, and Organovo.