Technical Analysis by: Rajiv Singh
Human ingenuity has driven our civilization way before we learnt how to use the wheel. While the expression ‘to reinvent the wheel’ is seen as a colloquial allegory, a number of ground breaking technological advances in the last few centuries (and more specifically in the last couple of decades) has seen human civilization leap forward in many areas of science and technology that define our day-to-day life. Since the mid-80s, human innovation has brought forward what many believe could be a technological revolution by itself, or a modern and literal way of creating the wheel or any object using 3D technology, more precisely 3D printing technology. This technology was successfully introduced in 1984 by Charles W. Hull of 3D Systems Corp. (NYSE: DDD) and is referred to as additive manufacturing or 3D printing for the common man. Additive manufacturing, simply put, is a process of making three-dimensional solid objects from a digital model without conventional machining techniques that use subtractive methods, which often results in a huge wastage of expensive raw materials.
Since the 80s, 3D printing has been applied in a number of fields from automotive to footwear. For instance, General Electric uses the technique to make fuel injectors for certain types of aircraft engines. China uses 3D printing to manufacture load-bearing components in aircraft. BMW uses 3D printing to produce fixtures that align roundels to steering wheels in its cars.
While its high cost and low adoption has limited usage for industrial purposes, this technology could become a mainstream consumer technology in the near future with the emergence of open source 3D printing. Companies like HP and 3M are also exploring opportunities in 3D printing, which explains the kind of commercial interest that this industry will generate in the future.
Industry Growth Prospects
According to Gartner, global shipments of 3D printers priced less than $100,000 will grow 49 percent in 2013 to reach a total of 56,507 units. Further, in 2014, the global shipments are expected to grow 75 percent to 98,065 units, followed by a near doubling of unit shipments in 2015. The quality and performance innovations in 3D printing technologies are seen to drive enterprise and consumer demand. Further, Gartner states that in 2013, the combined end-user spending on 3D printers will grow to $412 million, up 43 percent from $288 million in 2012.
According to Wholers Associates, the value of additive manufacturing (3D printing) market worldwide is likely to grow 5-fold from $2.20 billion in 2012 and to reach $10.8 billion by 2021.
In terms of installations of 3D printers worldwide in 2013, the US accounted for the largest share of 38%, followed by Japan with 9.7%, Germany with 9.4%, China with 8.7% and other countries with 34.2%.
3D Systems Corporation (NYSE: DDD)- The Market Leader
3D Systems Corp. (NYSE: DDD) has introduced 3D printing to the world and is the largest player in the market. The company also provides 3D authoring tools for digital imaging and design. It has several advantages over its competitors, the main one being its unmatched portfolio with leading brands, innovative business model, and experienced management team.During the second quarter of 2013, its revenue grew 44.5% to a record $120.8 million, fuelled by a 107.9% increase in printers & other products revenue and 30.1% overall organic growth. Gross profit increased 45.7% on higher revenue and gross profit margin expanded to 51.8%. The key concern for the company is the successful integration of its past acquisitions and how it leverages these acquisitions to create value for its customers.
As the third quarter earning approaches (on Oct’29), DDD’s stock is showing an uptrend. The company’s shares have gained 6.50% in the last one month and 11.57% in the previous three months, outperforming the S&P 500, which has advanced 0.60% and 0.92% during the respective periods.
WSA Technical view on 3D systems
3D Systems Corporation (NYSE: DDD) is trading below its 20-day moving average, but much higher than its 200-day moving average, which gives a Buy signal to investors. The RSI of around 60 indicates that the stock still has an upward potential. Momentum oscillators including MACD suggest a Buy. Overall, most of the Buy signal at current levels makes it a strong Buy in the near term.