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Morgan Stanley: 2 Biggest 3D Printers Sew Up Market

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The two biggest names in 3D printing have the key professional market effectively sewn up for the moment, with patent protections that leave potential rivals stuck in the mud, an analyst said Thursday.

Despite growing consumer interest, commercial use of the technology accounts for more than 90 percent of the industry's revenue. Morgan Stanley's Scott Schmitz said Stratasys, Ltd. (NASDAQ: SSYS) and 3D Systems Corporation (NYSE: DDD) stand to get the lion's share of that business through the near term.

"Competitive pressures won't materialize in the near term given patent protections and underdeveloped service functions at competitors," Schmitz said in a note Thursday.

Schmitz initiated coverage Thursday of Stratasys with an Overweight rating and $135 target; he maintained an Equal-weight rating on 3D Systems, citing its prospects for increased spending on operations.

Despite the industry's apparent trendiness, neither company is a market darling: Both stocks faltered badly this year when higher operating expenses raised worries about profit margins.

3D shares are down more than 44 percent year to date, while Stratasys is off about 10 percent.

But Schmitz is confident the total market for 3D printing technology will post a compound annual growth rate of 24 percent through the coming decade, to $13 billion.

Although both companies have boosted operating expenditures about 60 percent in the past year, 3D is still spending at a rate 10 points lower than Stratasys. It's also growing at a slower rate and Schmitz says that points to a likelihood it will need to further boost spending.

Stratasys changed hands recently at $121.61 a share, up 1.4 percent; 3D was nearly unchanged at $51.72.

Latest Ratings for DDD

Oct 2016FBR CapitalAssumesMarket Perform
Aug 2016JefferiesMaintainsHold
Jul 2016PiperJaffrayDowngradesNeutralUnderweight

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Posted-In: 3D Printing Morgan Stanley Scott SchmitzAnalyst Color Price Target Initiation Reiteration Analyst Ratings


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