3D printing companies have been struggling due to the shortcoming of the technology. The likes of 3D Systems (DDD, Financial), Stratasys (SSYS, Financial), ExOne (XONE, Financial) and others have underperformed the market by a significant margin. Out of these, 3D Systems has been the most hyped company, with many expecting it to replace traditional ways of industrial manufacturing. Despite the drop, the company is still overvalued, and I expect it to continue to disappoint investors.
The 3-D printing industry has been struggling lately. The risks are high after 3D systems reported a 75% decline in earnings for 2014. If the situation of the company remains the same in the future, than there will no scope for this company.
Struggling
The latest results of the company have stated that previously flagged together business is not functioning properly. It is very corporate for the company that has orders pushed out to see the bright side in the following weeks, but none of the statements from 3D Systems recommend a real reflection in the business.
3D Systems’ gross margin has been decreasing rapidly for numerous quarters due to increased competition and pricing action.
Shortcomings
The essential explanation for the 3D printing hype was the technology's capability to supplant the conventional methods for modern industrial manufacturing. While investors may even now anticipate that 3D printing stocks will ricochet back, I don't think it will happen at any point in the near future as the technology is still distant from reforming modern manufacturing ways.
I will highlight three elements that may confine the reception of 3D imprinting in this article. They are high time utilization, lack of strength of produced goods, and amazingly high expenses. Notwithstanding headways in 3D printing technology, the mechanical assembling methodology is still a considerable measure speedier and cheaper.
The escalating justifications for missing estimates are not satisfactory. Despite currency headwinds and economic issues, the company needs to achieve goals for future growth. Investors need to stay away from the stock until the company achieves goals.
Threat to 3D printing
Hewlett-Packard (HPQ, Financial) claims that multi jet fusion will be an attractive target for industrial and professional markets, as it is 10 times faster than today’s leading and selective laser sintering technologies. Cash on balance sheet of the 3D printing industry is less than three times of HP in worldwide revenue in 2014.
Thus, stockholders may have grown concerned that as soon as HP’s 3D printer sales rise, stocks of 3D printing will lay down. To date, it is not clear that to what extent HP’s appearance in 3D printing could affect the reputable 3D printing companies.
Conclusion
3D Systems has multiple headwinds going forward. The technology is still far off from regular use and the company’s dominance is threatened by the arrival of new competition, namely, Hewlett-Packard. Hence, the risk/reward ratio is in the favor of the short side, which is why I think investors should sell 3D Systems.
