Today we have a very speculative idea: take stock of the manufacturer of 3D printers 3D Systems (NYSE: DDD), in order to capitalize on the expected growth in demand in this area.
Growth potential and validity: 20,5% behind 14 Months; 54% behind 4 of the year; 11% per year for 15 years.
Why stocks can go up: 3D-seal has a great future.
How do we act: we take shares now by 32,34 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
If you want to be the first to know, did the investment work?, subscribe: as soon as it becomes known, we will inform.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark: as with the investment idea as a whole, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
We love, appreciate,
Investment editorial office
What the company makes money on
DDD makes 3D printers and provides services in this area. What the company's printers look like, can be viewed on her website., but for the most part these are printers for the corporate sector.
According to the annual report, The company's revenue is divided into the following segments.
Goods — 61,2%. A variety of printers: for plastic, for metal, for ceramics and so on. Dedicated scanning software, design and virtual simulations for the medical sector. Segment gross margin — 31,6% from its proceeds.
Services — 38,8%. Technical support and training services for the company's clients. Manufacturing services for the company's clients - from prototyping to more complex projects. Specialized services for the medical sector: surgical planning, printing devices and tools, building anatomical models, etc.. Segment gross margin — 52,7% from its proceeds.
Report lacks detail: it would be useful to know, what types of printers does the company have - ceramic or metal, — how much revenue they give and what is the structure of revenue by types of customers. We know, that the company serves customers from almost every possible industry: everyone always needs to print something voluminous.
Revenue by country and region:
- Both Americas 50,25%. USA give 49,47% of the entire revenue of the company.
- Europe, Middle East and Africa - 38,34%.
- Asian-Pacific area - 11,41%.
The company is unprofitable.
Arguments in favor of the company
Fell down. The company's shares fell by 41,57% since February this year: from 55.35 to 32,34 $. The fall was pretty strong, And, maybe, we can pick up stocks in anticipation of a rebound.
Something about a fast growing market. Expected, that DDD's target market - 3D printing and related solutions and products - will increase from $ 15 billion in 2021 to $ 37.2 billion in 2026. Not long ago, DDD bought Volumetric Biotechnologies, which deals with the printing of biomaterial, - maybe, from this, those, who counts, that soon the missing organs for transplantation can be massively printed on printers.
The company does not have the largest capitalization - $ 4.05 billion. Quite possible, that its shares will be easy to pump to retail investors, because they read somewhere, that "the sector is very promising".
Market prose. In general, the company has something to hope for without speculation. In the idea for Proto Labs, we have already discussed good prospects for companies, related to R&D and small-scale production in connection with the expected growth of investments of the corporate sector around the world in the renewal of fixed assets. And 3D printing is needed primarily for creating prototypes and a small number of parts..
Also DDD could benefit from Biden's infrastructure package, which is about to become reality. This will stimulate the industry and promote demand for DDD solutions.: will increase the wear and tear of the equipment of manufacturing companies and increase their need to invest in business.
Life has become better. DDD Shows Progress In Latest Report: the unprofitability of its business is reduced - and the exit to profit, maybe, not far away. This can attract investors from among banks and funds into shares..
Can buy. У DDD 35 years of experience in additive manufacturing - and it has solutions for all industries: from dentistry and surgery to jewelry and high-tech production. Considering all of the above, it may well be bought by some large industrial conglomerate.
What can get in the way
Expensive. Company P / S is approximately 6,55 - which is not very little. And if we take into account the unprofitability of the company, and then, that its revenue has not grown particularly rapidly in recent years, you can even decide, that the company is expensive.
Unprofitable. The company has been on the market for a long time, but she has no profit. Unprofitableness will contribute to the volatility of these stocks. And there is always the possibility of bankruptcy, even taking into account that, that DDD's bookkeeping is quite accurate: she has enough money to cover all urgent debts.
Not all at once. Waves of investor interest in 3D printing are periodically replaced by disappointment, when it suddenly turns out, that so far not every individual user can independently print a house for himself.
3D printing technology is still quite raw and needs significant improvement: have problems with a lot of marriage, compliance with the temperature regime. So DDD will remain in the position of such a risky startup for some time., the technology of which has not yet been fully mastered. It needs to be understood and accepted., so as not to be surprised by the volatility of these shares.
Hot time puts its try. The company has production and assets around the world, and more than half of its sales are made outside the United States. This means, what is the logistic problem, as well as the increase in the cost of labor and raw materials will be reflected in its reporting. Well, the permanent threat of a new quarantine must also be taken into account.: as the experience of 2020 has shown, DDD business is not responding well to the decline in industrial activity in the world.
What's the bottom line?
Shares can be taken now by 32,34 $. Then there are three options:
- wait, when will the shares be worth 39 $. Think, we will reach this level in the next 14 Months;
- wait, when will the shares be worth 50 $. Here, maybe, have to wait a year 4, to make 3D printing widespread;
- hold shares 15 years, to see, how the company will become IBM from the world of 3D printing.
However, it should be remembered that, that this idea is very volatile. So don't invest in these stocks, if you're not ready for it, what will storm them.
