3d Systems Corporation: Long-Term Prospects Look Bright


3D Systems shares have declined more than 53% in the last 12 months. The 3D printing company continues to sacrifice short-term profits as it spends heavily to gain market share and fuel long-term growth. 3D Systems’ extreme diversification has raised concerns over integration of more than 50 acquisitions.

Investors skeptical of 3D Systems’ acquisition-fueled growth

Investors have been skeptical of its growth-by-acquisition strategy. But the Rock Hill-based company has said that it would slow down the pace of acquisitions this year and fine tune its investments. Bright spots in its long-term future are clearly visible. It is one of the first movers in the 3D printing industry. First movers often enjoy a sustainable long-term competitive advantage.

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3D Systems’ direct metal printing business is growing leaps and bounds. Direct metal segment is expected to grow at a faster pace than the overall 3D printing industry as the technology makes inroads into manufacturing applications. 3D Systems entered the segment by acquiring Phenix Systems in 2013. Last year, the company’s direct metal printing revenue skyrocketed 175% YoY to $39 million.

Direct metal printing accounts for only 6% of the company’s total revenue. But given its growth rate, it should become a significant contributor in the next few years. 3D Systems has sold out its direct metal printers almost every quarter since the acquisition of Phenix. The company had to open a second manufacturing line to meet the rising demand.

Healthcare a bright spot for 3D Systems

3D Systems is also strengthening its healthcare segment. Healthcare revenue rose 80% YoY to $129.3 million in 2014, which includes 46% organic growth rate. Healthcare accounts for close to 20% of the company’s total revenue. Healthcare 3D printing is expected to gain further momentum as personalized medicine is an expanding market. The overall healthcare 3D printing market is estimated to reach $4.04 billion by 2018.

3D Systems has guided revenue of $850-$900 million for the current fiscal year, with adjusted earnings of $0.90 to $1.10 per share. Shares of the company fell 1.66% to $27.24 at 1:03 PM EDT on Friday.