CEO Dion Weisler has HP's (NYSE: HPQ) PC unit flying high. Despite the negativity surrounding the global PC market -- shipments declined again by nearly 6% last quarter -- HP continues to make headway in its race to catch China-based Lenovo and take over the top spot.
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The strength of HP's PC unit has been the impetus for its stock jumping 27% year to date. That's the good news. The not-so-good news is that HP's printing division in general and supply sales in particular have been dismal for several quarters now. For HP to reach its valuation potential, the printing division needs to at least hold its own, and the expected surge in the commercial 3D printing market could be just what the doctor ordered.
Image source: HP.
The time is ripe for 3D printing
According to a comprehensive study of 2015 3D printing sales, the manufacturing industry alone reported a 25.9% increase to $5.17 billion. Toss in over 278,000 desktop 3D printing units -- these are generally considered devices costing under $5,000 -- and it's clear the negative headlines surrounding the burgeoning marketplace that still occasionally crop up are incorrect.
In fact, as quickly as manufacturing and similar industries are adopting 3D printing, the seemingly sky-high estimates could prove to be conservative. One market estimate suggests 3D printing will generate $7 billion this year, nearly double to $13 billion by 2018, and will continue to climb to a whopping $21 billion by 2020.
To put the opportunity that 3D printing presents into perspective, the commercial hardware segment of HP's printing division reported just $1.29 billion in sales last quarter, down 3% compared to a year ago. Worse yet, it was HP's best-performing segment. Supplies revenue -- which generates more than half the revenue of its printing division -- took a beating last quarter, nosediving 18% to $2.84 billion.
HP's supplies sales woes could also be remedied by 3D printing. The laundry list of materials required to complete various 3D printing applications is seemingly endless. That said, thermoplastic filament alone is forecast to become a nearly $7 billion market in the next 10 years. Now, add in the dozen or so other materials widely used to complete various manufacturing operations and the revenue possibilities are enormous.
Where to from here?
As it stands, HP is nowhere to be seen in a list of top-selling 3D printer manufacturers. The market is still led by upstarts Stratasys (NASDAQ: SSYS), 3D Systems (NYSE: DDD), and privately held XYZ Printing, among a slew of others. Stratasys and 3D Systems, in particular, have bull's-eyes on their backs as folks like HP enter the picture.
HP was late to the 3D party, but its two Fusion commercial 3D printing offerings have already made a splash. According to anindustry analyst, one factor in the so-so quarters both Stratasys and 3D Systems reported recently may have been due to manufacturers holding off on purchasing a new unit until HP's Fusions were readily available.
Though HP isn't on the 3D printing sales radar just yet, it appears the all-important manufacturing sector is eager to give it a look before opting for a Stratasys or 3D Systems device. Combined with the still new-ish Design Jet desktop solution, HP now has its 3D ducks in a row, and investors should begin to see early results in another quarter, or two.
It won't take too many 3D printer sales to move the needle, either. HP'slow-end Fusion 3D printer will sell in the $120,000 to $155,000 range, while its elite 4200 model could climb to over $200,000 depending on operational requirements. With those price points, HP won't have to sell millions to make an impact on its top and bottom lines. And HP's 3D printer prices are less than half comparable units from Stratasys or 3D Systems.
The 3D printing market isn't exactly low-hanging fruit, but with HP's global reach and eagerly anticipated offerings, both its hardware and supplies revenue woes could be cured in one fell swoop.
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Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends 3D Systems 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.