Buy Stratasys (SSYS) and 3D Systems (DDD) on Weakness, Stifel Says; HP's (HPQ) Entry is Bullish

Stifel's 3D printing analyst Patrick Newton weighed on news H-P (NYSE: HPQ) officially entered the 3D market after originally discussing its plans to enter the Additive Manufacturing market more than a year ago.

Newton said the specs of HP's printer, when compared to what out there, "appears impressive, with HP targeting the commercial Additive Manufacturing market with its initial printer release."

The analyst highlights that the 3D Printer market generated $3.0 billion in revenue in 2013 with approximately $1.5 billion derived from Printers, with the remainder coming from services and material. They sees the printer market expanding at a 35% CAGR through 2020 to $7.2 billion with the overall Additive Manufacturing industry growing at a 28% CAGR to $16.5 billion.

He concludes that "HP’s bullishness on, and forthcoming entry into, the 3D Printer industry should be viewed as a positive for the group as it is supportive of our view Additive Manufacturing has significant room for aggressive revenue growth."

Newton added, "Despite our expectation of increasing competition, our analysis indicates the 3D Printing industry remains very underpenetrated with very large addressable markets, with our estimate total end-market penetration is approximately 6% relative to a TAM opportunity of roughly $50 billion in the next decade +. We view the market as having significant growth opportunities, and room for new entrants, as the technology continues to be an enabler of multiple industries that should drive increased adoption in core markets, including industrial, medical, automotive, and aerospace."

They are buyers on weakness in the group, telling clients specifically to accumulate shares of Stratasys (NASDAQ: SSYS) and 3D Systems (NYSE: DDD). "Although not attempting to overlook HP’s eventual entry into the market, the announcement comes well ahead of commercial development (14 months from general MJF availability – at a minimum – with HP already delaying its market entry multiple times) and is clearly supportive of the tremendous Additive Manufacturing market opportunity," he said.

SSYS is down 3% intra-day, while DDD is down 5%.

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