Investidea: 3D Systems, because 3D printing

Инвестидея: 3D Systems, потому что 3Д-печать

Today we have a very speculative idea: take stock of the manufacturer of 3D printers 3D Systems (NYSE: DDD), to capitalize on the expected growth in demand in this area.

Growth potential and duration: 20,5% for 14 months; 54% for 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. Hopefully, 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 are we writing, Are forecasts and hypotheses, not a call to action. It is up to you to rely on our thoughts or not..

If you want to be the first to know, did the investment idea work, subscribe: as soon as it becomes known, we will inform.

And what about the author's predictions

Research, for example 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 perform better than people, but alas, they work worse.

Therefore, we do not try to build complex models.. The profit forecast in the article is the author's expectations. We indicate this forecast as a guideline: as with the investment in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.

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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.

Products — 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 his proceeds.

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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 of devices and instruments, construction of anatomical models, etc.. Segment gross margin - 52,7% from his proceeds.

Report lacks detail: it would be useful to know, what types of printers the company has - ceramic or metal, - how much revenue they give and what is the structure of revenue by types of clients. We know, that the company serves clients from almost all possible industries: everyone always needs to print something voluminous.

Revenue by country and region:

  1. Both Americas - 50,25%. USA give 49,47% of the entire revenue of the company.
  2. Europe, Middle East and Africa - 38,34%.
  3. Asian-Pacific area - 11,41%.

The company is unprofitable.

Инвестидея: 3D Systems, потому что 3Д-печать

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, possibly, 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 stock will be easy to pump for 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 due to the expected increase in corporate sector investment worldwide in the renewal of fixed assets. And 3D printing is needed primarily for prototyping and a small amount of parts..

Also DDD can benefit from Biden's infrastructure package, which is about to become reality. This will drive the industry and drive demand for DDD solutions: will increase the wear and tear on the equipment of manufacturing companies and increase their need to invest in business.

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Life has become better. DDD Shows Progress In Latest Report: the unprofitability of her business decreases - and the exit to profit, possibly, not far away. This can attract investors from among banks and funds to the 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 unprofitableness of the company and then, that its revenue has not been growing 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 considering 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 periodically give way to disappointment, when it suddenly turns out, that while not every individual user can independently print a residential building for himself.

3D printing technology is still quite crude and requires significant improvement: there are 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., whose technology has not yet been fully mastered. It must be understood and accepted, so as not to be surprised at the volatility of these stocks.

Hot time puts its try. The company has production and assets around the world, and more than half of her sales are done outside the United States. It means, what is the logistic problem, as well as an 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's business is not responding well to declining industrial activity in the world.

What is the bottom line

Shares can be taken now by 32,34 $. And then there are three options for action.:

  1. wait, when will the shares be worth 39 $. I think, we will reach this level in the next 14 months;
  2. wait, when will the shares be worth 50 $. Here, possibly, have to wait a year 4, to make 3D printing widespread;
  3. hold shares 15 years, to see, how the company will become IBM from the world of 3D printing.
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But you should still remember that, that this idea is very volatile. So don't invest in these stocks, if not ready for that, what will storm them.

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