The Love for 3-D Printing

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. 

On Monday, April 6, 2020 3-D printing stocks like Proto Labs (NYSE: PRLB) and 3D Systems Corp (NYSE: DDD) have skyrocketed as investors become optimistic that 3-D printing will become big. As the coronavirus pandemic led to shortages for ventilators, face masks, etc. 3-D printing has been used to help meet the insatiable demand for masks. 

While 3-D printing has been a growing industry that's optimistic about, at the end of the day, companies like 3D Systems Corp and Stratasys Ltd. (NASDAQ: SSYS) aren't profitable. Because of this, that is why I feel that Proto Labs is the best stock pick for the 3-D printing space (for the meantime) because it's profitable and its business model prevents them from having to sit on too much inventory incase a downturn in the 3-D printing space happens. 

Proto Labs is different from 3-D printing device makers like 3D Systems and Stratasys where Proto Labs buys and uses the 3-D printing devices to produce things for clients while 3D Systems and Stratasys make the 3-D printers and heavily depend on the 3-D printer market, which could force them to sit on a lot of inventory at times. 

Photo by Ines Álvarez Fdez on Unsplash

Something I really admire about 3-D printers is they can make anyone a manufacturer. Instead of needing to go to the store to buy a new mug or container, people can just print one at home. This will make people self-sufficient and add a level of convenience that unimaginable. Want a new toy? Print one up. The question with this new way of life is, who are the winners and the losers? 

The obvious winners with this trend are the players that provide the materials needed to print anything. The additives providers will be the new cash cows as people will constantly need to use additives to print things. Also, the software providers are going to benefit a lot as special software is needed to people wanting to create designs for people to use to print things. 

The losers, it's really unknown because there are so many ways this new way of life will go. On one end, people will be so self-sufficient that the logistics industry will shrink, hurting players like Fedex and UPS. Also, retailers stand to lose out as more people would rather print their own things rather than go to a store and buy them. Industrial property owners and manufacturers will loose out as manufacturers will be in lower demand due to the sufficiency of everyday people. 

Before we start becoming pessimistic over the futures of the many players of those potential losers, things can be different. Laws might restrict the printing of certain things, leaving consumers dependent on stores. Retailers might start offering people access to their product designs in the form of a subscription. Logistics players might have to deal with an overwhelming amount of additives to transport as the world starts relying on them to produce things.

Photo by Rob Wingate on Unsplash

Overall, the 3D printing industry is bright. There are tons of great things that will happen from this growing industry. In the meantime, investors need to be cautious when investing in this sector and should invest in players that are already profitable and diversify their bets, treating every position in the space as a speculative position. 

While I have made predictions in this blog post, these predictions might not materialize and another future could be presented to us. We'll never know. Maybe 3-D printing will take a lot longer to become mainstream despite all the positivity the industry has received during these hard times. 

Cautious investing!