Is 3D printing technology finally ready to take off?

Equities 6 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  The 3D printing industry, also called additive manufacturing, has been around since the late 1980s and has experienced many false starts including the most hyped one in the years around 2013 when investors and the industry believed that every household was about to own a 3D printer. The future turned out very different and the industry has finally realised that the future is additive manufacturing creating better components for industrial applications. The recent years of standardization, availability of materials, and lower costs have caused some research firms to predict that the industry is at the cusp of seeing a decade of rapid growth.


3D printing was a hot and exciting topic back in the years 2010 and 2013 with high expectations that 3D printing would turn into a high growth consumer market with households installing their own 3D printers at home. It turned out to be a false start for the industry like so many other times since the 3D technology started to be commercialized in the late 1980s.

The constant issue for the 3D printing has been its complexity from designing the component in specialized software, the high costs and lack of standards. 3D printing is still used but has slowly adopted the word additive manufacturing reflecting that its future lies in manufacturing. The past couple of years have seen increase in standardization, lower costs, more materials available for manufacturing with especially advancements in metals printing causing some research firms to project a $41 billion 3D printing market by 2026.

3D printing is suitable for fast and cheaper prototyping of components, but the industry is not ready for mass scale production yet, but increased standardization will lead to an accelerated cost reductions and more adoption over the coming years, but the growth path could be quite long for additive manufacturing. The chart below shows the chance in 3D printing adoption over the past four years in industrial manufacturing. There are growing signs that the next and more sustainable high-growth stage is starting for additive manufacturing. We see the 3D printing industry as an option for many industrial companies to reduce costs and weight of components which in turn increase energy efficiency. In that light the additive manufacturing industry could be part of the future decarbonization trajectory that we describe in our Q3 Outlook.

https://amfg.ai

3D printing theme basket

Our basket on 3D printing companies is the smallest we have done so far with only 16 companies making the cut. We want our baskets to provide as pure exposure as possible to a theme and thus our theme basket is much narrower than the available 3D printing ETFs in the market. As the table shows, analysts are in general positive on the industry with a median price target being 17% above the current price. The basket has also outperformed the MSCI World since December 2015, although as we all our theme baskets the five-year performance chart does have some survivorship bias and thus should be taken as an indicator for future performance. One of the most hyped 3D printing companies right now is Desktop Metal which IPO’ed in May 2019 and just begun commercialization with revenue expected to hit $103mn in 2021; with a market value of $2.8bn Desktop Metals reflect the renewed risk appetite for this industry.

NameMkt Cap (USD mn.)Sales growth (%)EBITDA growth (%)Diff to PT (%)5yr return
3D Systems Corp5,009-7.6NA-38.4187.1
Desktop Metal Inc3,205720.8NA39.7NA
Allegheny Technologies Inc2,634-33.2NA18.657.8
Proto Labs Inc2,624-5.4-26.510.861.6
Carpenter Technology Corp1,883-37.5NA11.032.6
Stratasys Ltd1,806-14.9NA-1.910.3
FARO Technologies Inc1,430-18.2NA22.7137.0
Materialise NV1,288-13.3-42.632.5253.5
SGL Carbon SE1,176-12.5NA-32.0-12.8
ExOne Co/The5343.2-34.615.5102.9
SLM Solutions Group AG506-0.332.939.2-4.1
Prodways Group SA175-19.7NA4.5NA
Amaero International Ltd89NANANANA
Meatech 3D Ltd89NA-4459.2NANA
voxeljet AG85NANA73.4-44.5
Titomic Ltd45-81.1-45.0505.1NA
Aggregate / median22,579-13.3-38.617.057.8

Source: Bloomberg and Saxo Group

Key risks

The 3D printing industry has experienced a lot of ups and downs since the late 1980s with the consumer hype period around 2013 burning a lot of investors causing sustained suspicion over the future of 3D printing. The industry is still small and there are still many obstacles that need to be overcome before additive manufacturing can take off in industry and thus the industry could experience another false start. Valuations are high and many of the companies in our basket are small and some have almost no revenue. This means that this is a very high-risk theme despite a potentially promising future. Another risk for investors is that large industrial firms create in-house additive manufacturing capabilities due to the need of deep integration into existing manufacturing processes and that the companies in our basket thus will not capture the value of 3D printing.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
Beethovenstrasse 33
CH-8002
Zürich
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved, we have put together a general Risk Warning and a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed here or within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.