Though the technology of 3D printing (additive manufacturing) is still in its early stages of development, many analysts are estimating that it will grow at a CAGR of 20%-30% for the next seven years and will nearly quadruple its value by 2020. It was widely assumed that the pioneer of the 3D printing industry, 3D Systems (NYSE: DDD), was well positioned to capitalize on this growth, but the impending arrival of another big-name player in the form of Hewlett-Packard may restrict 3D Systems from fulfilling its potential. In addition, other players like Stratasys (Nasdaq: SSYS), ExOne (Nasdaq: XONE), and Voxeljet (NYSE: VJET) will also suffer due to the arrival of HP. Hence, I think investors should short the aforementioned 3D printing stocks to benefit from their overvaluation.
That being said, HP's impending arrival is not the only threat to these stocks. 3D printing technology is still not viable for practical use, which is why I find the overvaluation of these stocks appaling. Let's take a look at the flaws of the technology that will prevent the companies from fulfiling their potential.
High Time Consumption
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The method of producing a simple product via 3D printing can consume plenty of time and can even last for a couple of days. By comparison, conventional industrial machines can churn out thousands of fully-finished products every day, and there's no way a present-day 3D printer can compete against that. Also, the fact that a 3D printer does not produce a fully-finished object and requires an extra step of removing the object from the printer, further delays the printing process.
So, when analysts projected that the 3D printing market will be worth $12 billion by 2020, they assumed that additive manufacturing will replace the process of industrial production. However, given the fact that the industrial manufacturing process is a lot faster, this assumption seems irrational.
The cost of setting up a traditional industrial machine is very high, but it makes up for it with its efficiency. This however, is not the case with 3D printers. Not only is a top-end 3D printer highly expensive, but the material used in printing is also not economical. And given the slow speed of 3D printers, spending over the odds for setting up multiple printers won't be considered profitable.
Hewlett-Packard's entry into the 3D printing market is great news for the industry as a whole, but might upset the sales of all the existing players due to the aforementioned reasons. In addition, the glaring flaws of the 3D printing technology will prevent the widespread use of 3D printers. Hence, I think investors should short 3D Systems, Stratasys, ExOne and Voxeljet to profit from the overvaluation of these companies.