Long-term Outlook: Oppenheimer Analyst Holden Lewis on the Future of 3D Printing Stock

Previously lauded by analysts as the next big thing, the 3D printing market saw a spectacular nosedive after its peak in late 2013. Now, with a little bit hindsight, we asked Oppenheimer Managing Director and Senior Analyst Holden Lewis what went wrong, and what the future holds.
Should current investors stick out the market in hopes of seeing those 2013 peak prices, or move on to the next big trend in tech? And should prospective investors brave this market, adhering to the age-old advice to buy low, or should they steer clear of an imploding industry? Lewis answers those questions, and more, within this interview. Overall, one thing remains clear. Lewis is deeply optimistic about the future of this market. His message remained constant: “there is no lack of ultimate demand for this type of technology. Of that I’m convinced.”

The future of 3D printing stock

The 3D printing market saw a clear period of decline following the hyped up stock prices in 2013. In summer of last year, Time reported that the major public 3D printing companies, such as Stratasys (NASDAQ:SSYS), 3D Systems (NYSE:DDD), ExOne (NASDAQ:XONE) and VoxelJet (NYSE:VJET), have declined in market value by 71 to 80 percent in the past year and a half. Lewis attributed this market slowdown to a combination of factors, both macro and industry specific. However, there is one challenge that only time can overcome: companies’ reluctance to become early adopters of this relatively new technology.

A report published by PwC identifies the two main barriers to full-scale 3D printing adoption as uncertainty concerning the quality of the final product and a shortage of individuals equipped to exploit the technology’s full benefits. Stratasys CEO Jon Cobb is quoted in the report as stating, “companies that get into 3DP may only have one engineer or one champion who is the prime mover … If you don’t have that champion, the technology is simply not taken up.”
Lewis echoed this perspective, commenting that “unless people really dig in, and figure out how they’re going to [use 3D printing], the path of least resistance in some cases is simply to put off the effort.” Therefore, one of the primary impediments to the 3D printing market appears to be the sheer newness of this industry. For investors, this obstacle might just be a major advantage.

Putting technology first

Despite the dismal state of 3D printing stocks, the technology itself is rapidly advancing. Beijing University recently made news for the creation of 50 large titanium alloy parts for aircraft carriers and rockets, all printed with titanium-based laser sintering 3D printing technology. Meanwhile, a Chinese toddler successfully underwent the world’s first skull reconstruction surgery using 3D printing technology. These dramatic headlines illustrate the innovation occurring in the field of 3D printing — innovation that companies are slowly, but surely, adopting.

In the long term, Lewis believes “there’s not going to be a manufacturing plant in the world that doesn’t have a 3D printer.” The PwC report affirms this outlook: 66.7 percent of manufacturers are currently adopting 3D printing, and 24.7 percent plan to adopt the technology in the future. Market forecasts are similarly optimistic about the future need for 3D printing technology. Analyst firm Canalys predicts that the market will reach $20.2 billion by 2019, representing an expected CAGR of 44 percent from 2014 to 2020. A recent report published by Techanvio is even more confident, predicting a CAGR of 48.6 percent in the same period.
And so, how can this growing demand for 3D printing technology continue to coexist with the market’s plummeting stock prices? The short answer is that it can’t. As Lewis explained, “that is a dynamic that cannot continue forever. At some point, either the industry has to fall in on itself, justifying the stock movements, or the stocks of these companies have to begin doing better.”
The widespread demand for 3D printing technology suggests that the first option is unlikely. And so, for Lewis, that leaves only one viable alternative: in the long term, the quality of the technology will drive the market forward, making the future of 3D printing stock a positive one.
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This is an updated version of an article first published on July 21, 2015 on 3D Printing Investing News. 

Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.

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