Materialise Remains Pacific Crest's Favorite Near-Term Idea In 3D Printing

Pacific Crest continues to prefer Materialise NV (ADR) MTLS as its favorite idea in the 3D printing space, as it has exposures to high-end software and the growing medical segment in addition to strong, cash-generating services division.

"[I]t doesn't compete in the crowded hardware market," analyst Weston Twigg wrote in a note. He has an Overweight rating on Materialise with a price target of $11.

Twigg said Proto Labs Inc PRLB is just beginning to ramp its 3D printing services division, which has been well received and is growing rapidly. However, high valuation likely limits near-term upside and keeps the analyst on the sidelines with Sector Weight rating.

The analyst highlighted both 3D Systems Corporation DDD and Stratasys, Ltd. SSYS could see an inflection in printer sales, up from the low levels last year.

However, Twigg noted that both companies face increasing pressure from new entrants in hardware, software, and materials segments that could threaten their closed ecosystem models. The analyst remains Sector Weight on both stocks.

Twigg said ExOne Co XONE could be at the brink of a turnaround.

"ExOne has struggled to gain traction with its unique binder jetting hardware, but we spoke with a couple of companies that are evaluating its technology, so perhaps ExOne could be at the beginning of a turnaround; in the meantime, we remain Sector Weight," Twigg noted.

The brokerage said its first industrial 3D printing study is a modest positive for 3D printing companies. The study showed 3D printing capex should remain the same or increase, a positive for 3D printing companies such as Stratasys, 3D Systems and ExOne .

The analyst said over half the companies surveyed plan to invest substantially in 3D printing capabilities and many companies expect 3D printing to move into production within five years.

However, Twigg said 3D printing isn't as overhyped as many think. Among the various complaints, the recurring view is that 3D printing is too slow. While lack of materials is another common complaint, companies are generally more enthusiastic about metal printing than polymer printing.