Elevated Market Expectations Dim Attractiveness of 3-D Printers
We like 3-D printer firms' growth fundamentals, but current valuations limit long-term investor returns.
The outlook for the 3-D printing industry remains upbeat, but the market's optimism continues to grow just as much, resulting in peak performance expectations and little margin for error. Both 3D Systems (DDD) and Stratasys (SSYS) are trading well ahead of our fair value estimates, making us hesitant to recommend the names to new long-term investors. While our summer travels to trade shows and discussions with industry participants have done little to alter our opinion, some emerging developments in the industry may shape the growth trajectory and moat prospects for companies in this sector.
Old Things Made New
Overlooked in the excitement surrounding 3-D printing is that the technology underlying many of the 3-D printers sold is already quite mature (between 20 and 30 years old). Patent expirations have helped bring the industry to prominence because they result in lower machine prices and greater number of manufacturers, but these factors act contrary to building a sustainable moat.
Daniel Holland does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.