3D Systems Corporation (NYSE:DDD) stock is down more than 41% this year so far. The company is well-positioned to benefit from the growing 3D printing industry. In fact, research firm Canalys estimates the 3D printing industry to grow at 45.7% annual rate to reach $16.2 billion by 2018. That represents massive growth opportunity for the company.
Hewlett-Packard and smaller firms could eat into 3D Systems’s market share
But 3D Systems Corporation (NYSE:DDD) is facing challenges from several quarters. Solid growth in the 3D printing industry is attracting more competitors. Hewlett-Packard Company (NYSE:HPQ) recently announced that it will enter the 3D printing market by the end of this year, intensifying the competition. HP has more than $15 billion in cash and it spends about $3 billion on R&D every year. That gives the Meg Whitman-led company enough firepower to establish itself in the 3D printing industry.
Exclusive: York Capital to wind down European funds, spin out Asian funds
York Capital Management has decided to focus on longer-duration assets like private equity, private debt and collateralized loan obligations. The firm also plans to wind down its European hedge funds and spin out its Asian fund. Q3 2020 hedge fund letters, conferences and more York announces structural and operational changes York Chairman and CEO Jamie Read More
Many 3D printing patents owned by 3D Systems Corporation (NYSE:DDD) are expiring. Consequently, the company’s royalty fees will be hit hard. Expiry of patents allow even smaller companies to enter the market easily. Previously, small firms that couldn’t afford the royalty fees simply stayed away and waited patiently for the patents to expire, says Anup Singh of Seeking Alpha. Besides, investment firms such as Harbor Capital Group are encouraging startups and willing to invest in the ones with disruptive 3D printing technologies.
Another big concern for investors is that the Rock Hill-based company is growing mainly through acquisitions. It has purchased more than 45 companies in the past two years. Recently, 3D Systems Corporation (NYSE:DDD) raised about $317 million in a secondary offering by diluting existing shareholders by 5.8%. The company plans to spend the proceeds on further acquisitions. The problem is successful integration of all these purchases to build a coherent platform. That would require immense execution expertise.
Super fast 3D printers could be a threat to 3D Systems
3D Systems Corporation (NYSE:DDD)’s two biggest hurdles to grow in the industrial segment are high price and low speed. To bring a new 3D printer with faster speed and lower price, 3D Systems will have to invest aggressively in R&D. In contrast, Hewlett-Packard Company (NYSE:HPQ) has a robust R&D budget to bring high-speed, lower cost 3D printers. Many other companies are also working to develop super fast 3D printers. Cincinnati Inc. has partnered with Oak Ridge National Laboratory to build 3D printers that would be 200-500 times faster than the existing printers.
3D Systems Corporation (NYSE:DDD) shares inched up 0.13% to $53.77 in pre-market trading Thursday.