The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

3D Systems Stock Prediction

Summary:

In spite of its past troubles, 3D Systems remains a major beneficiary of the expected 22.3 CAGR in global spending on 3D printing.

IDC predicts that worldwide spending on 3D printing hardware, materials and related services will reach $28.9 billion by 2020.

As a pioneer in 3D printing, 3D systems has established itself as a trusted brand that gives it competitive advantage against late-comers like General Electric and Hewlett-Packard.

3D Systems is also an obvious takeover target from traditional laser and inkjet printer manufacturers like Epson, Canon, and Fuji-Xerox.

The one-year algorithmic forecast for DDD is very positive.

I recently bought 800 shares of 3D Systems (DDD). I felt that this industry leader of 3D printing or additive manufacturing process is set to break out this year. The expected steady surge in global spending on 3D printing is a good incentive for me to once again bet on a 3D printing stock. IDC estimates that global spending on 3D printing-related products and services will post a 22.3% CAGR (Compound Annual Growth Rate) until 2020.

From the estimated $13.2 billion spent last year, IDC expects global spending on 3D printing to hit $28.9 billion by 2020. The 10-year forecast report of IDTechEX also predicts that 3D printing spend will hit $40 billion by 2027. This year could really be the turnaround point for battered-down 3D printing tickers like DDD.

The one-stop-shop capability of 3D Systems to provide any additive manufacturing requirements still makes it the top go-to provider for consumer and institutional customers. Unlike late-comers like Hewlett-Packard (HPQ) and General Electric (HPQ), 3D Systems already has loyal clients for industrial 3D printing, prototyping, and manufacturing.

Please compare the two charts below. IDC’s top use case for 3D printing survey jibes perfectly with 3D Systems’ product portfolio. The slow growth of consumer or home-use 3D printing is insignificant to 3D Systems’ future growth prospects. Enterprise customers such as automotive, defense, medical, and CAD designers will mostly be providing the business for 3D printing companies like 3D systems.

(Source: 3D Systems).

If IDC and IDTechEx’s predictions come true, 3D Systems’ topline and bottom-line growth prospects are indeed very rosy. It makes sense to expect 3D Systems to hit annual revenue of $1 billion within the next three years. As more companies increase their spending on 3D printing-related products and services, additive manufacturing leaders like 3D Systems will likely experience a surge in revenue.

Consequently, a surge in annual revenue can also mean that 3D Systems can return to profitability.

Possible Takeover Offer From Japanese Printer Manufacturers

My bullish thesis is also due to my belief that printing rivals of Hewlett-Packard could also be possible takeover suitors of 3D Systems. Japanese firms like Canon (CAJ), Epson, Fujifilm (FUJIY), Konica-Minolta, will eventually have to get involved in 3D printing. The stagnating market for laser and inkjet printers require all printer & ink manufacturers to source out new revenue streams. Buying a proven manufacturer like 3D Systems will jumpstart the entry of Canon or Epson in the additive manufacturing industry.

General Electric dared to buy two European 3D printing companies last year for $1.4 billion. Canon or Epson could likewise easily afford 3D Systems, which has a market cap of less than $1.7 billion. HP already shipped out working prototypes of its 3D printer to its co-development partners last December. Canon and other printer companies can no longer afford to ignore the growth opportunity in 3D printing.

Buying 3D Systems and helping it generate more than $1 billion in annual revenue could also help Canon offset the declining sales of cameras.

Conclusion

Even without being bought by a bigger firm, 3D Systems remains a good long-term investment. Let us not forget that 3D Systems also has zero debt and more than $180 million in cash. It can still acquire smaller firms to shore up its portfolio of 3D printers and services.

A return to profitability this year could also boost DDD’s price back to above $20 by early next year. The one-year algorithmic forecast for DDD is very bullish. I Know First gives DDD a very high predictability score of +0.78, which really convinced me that this stock is worth adding again to my long-term portfolio.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

I Know First Past Success With DDD

On January 3, 2017, the I Know First algorithm accurately predicted a bullish signal for DDD. During the 7 day time-span, the stock increased due to speculation 3D Systems would be acquired by General Electric. In accordance with I Know First’s self-learning algorithmic forecast, DDD shares increased at one point over 20% since the forecast’s release.