Although 2014 was a horrible year for 3D printing stocks, 2015 has only just begun, and it's still anyone's guess how things will shape up for the sector. Investors with a strong stomach for volatility who approach 3D printing from a long-term perspective could potentially find opportunity from the price dips of 2014. Without further ado, here are my top 3D printing stocks for 2015.
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Top diversified 3D printing stock
Two years ago, I argued that 3D Systems is the best bet for investors who wanted to own a broad-based, diversified 3D printing company. After all, 3D Systems offers the broadest 3D printing technology portfolio around, which in theory should allow it to cater to a bigger market opportunity than its competitors. Unfortunately, in practice, 3D Systems' jack-of-all trades approach has been plagued with execution issuesanda lack of focus, and has missed Wall Street expectations on numerous occasions in 2014. For these reasons, I believe investors may be better served with Stratasys , the best-diversified 3D printing stock in 2015.
In recent years, Stratasys' management team has demonstrated a greater degree of focus than 3D Systems in terms of its operational efficiency, acquisition strategy, and approach to overall market opportunity. With only three 3D printing technologies in its portfolio, Stratasys can allocate its resources more effectively than 3D Systems, which has the burden of having seven distinct technologies. Consequently, Stratasys' business model also has fewer moving parts and points of friction than 3D Systems'.
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Beyond its more streamlined approach, Stratasys has built a reputation for being more concerned with making acquisitions that either enhance or complement its existing business in some way, whereas 3D Systems has often made disjointed acquisitions that don't necessarily come together beyond falling under the umbrella of 3D printing. After all, 3D Systems is the company that offers sugar-based 3D printers for bakers and the ability to 3D-print aerospace components for engineers -- catering to completely different industries.
Top turnaround 3D printing stock
Although ExOne's stock decline of more than 70% in 2014 suggests that the underlying business suffered a catastrophic blow, there are still plenty of reasons for investors to get excited for this specialty industrial 3D printing company to turn things around in 2015.
A major source of ExOne's disappointment in 2014 was related to numerous product shipment delays, largely at the request of customers, which dragged on revenues and forced the company to consistently miss earnings expectations. ExOne also began a transition from targeting metal foundries -- which proved to be reluctant to adopt ExOne's binder jetting 3D printers because they threaten industry trade secrets -- to directly targeting metal foundry customers. While it's currently slow going, the hope is that this transition will eventually expand ExOne's addressable market by a wide margin, as there are more foundry customers than there are metal foundries.
To get involved with ExOne, investors will need to have faith in management's long-term vision that its binder jetting technology is uniquely suited for a variety of 3D printing applications, and that its transition from focusing on metal foundries to their customers begins to bear fruit.
Top alternative 3D printing stock
Source: Proto Labs.
Last April, rapid manufacturerProto Labs officially became a 3D printing stock when it acquired FineLine Prototyping, a leading 3D printing service bureau based in Raleigh, North Carolina. As a result, Proto Labs' manufacturing services can now fluidly take a product developer's idea through the majority of the product design process -- from a conceptual 3D-printed model to a larger-scale manufacturing run in the tens of thousands, with real manufacturing processes like CNC machining and injection molding.
Where I think Proto Labs really stands out from the crowd is in the breadth of quick-turn manufacturing services it offers, and its ability to scale by leveraging cutting-edge automation technology. Together, these factors raise the barrier of entry for competitors to replicate Proto Labs' business model in its entirety, because the capital, technology, and expertise required are intensive.
In terms of disruption, Proto Labs remains better insulated from the threat of technological disruption than its 3D printing peers because it's an adopter of technology rather than a producer. Should a breakthrough 3D printing or manufacturing technology enter the market, Proto Labs can simply integrate it into its existing operations and offer it to its customers as an additional manufacturing or prototyping service. This adaptability, I believe, also helps make Proto Labs a great long-term investment candidate.
Taking a stake
While no one can be certain how 2015 will treat 3D printing stocks, I think Stratasys and Proto Labs could be among the top performers in the sector, while ExOne carries a higher degree of risk, contingent upon whether it can stage a successful turnaround. Ultimately, the most important factor to consider when investing in any 3D printing stock is whether or not the underlying business is operating as expected and continues to hold the potential to deliver on its promise of earnings growth over a long time horizon.
The article Top 3D Printing Stocks for 2015 originally appeared on Fool.com.
Steve Heller owns shares of 3D Systems, ExOne, and Proto Labs. The Motley Fool recommends and owns shares of 3D Systems, Apple, ExOne, Proto Labs, and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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