Top Stocks to Buy: Why DDD Deserves A Price Target Of $13

motek 1This 3D Systems top stocks to buy 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.

Summary:

  • Exploit the stock markets’ panic over coronavirus. My fearless forecast is 3D Systems’  stock can bounce back to $11 before June.
  • Going forward, 3D Systems will likely find more buyers for its production-grade additive manufacturing printers.
  • Manufacturers who rely too much on outsourced factories in China would likely consider purchasing 3D printers.
  • By having their own in-house 3D printers, companies can quickly produce the most important parts/components that their products require for assembly/production.
  • Wider adoption of additive manufacturing is imminent. I expect 3D Systems to become profitable by end of 2020 or early 2021.­­

3D Systems’ (DDD) stock went up 16% after its Q4 2019 earnings report on February 26. Unfortunately, the contagious panic over coronavirus caused DDD to drop (from $11.09 to as low as $9.20) between February 27 and 28. The trading volume on those two days was much higher than February 25. Many frightened investors unnecessarily dumped their shares. Take advantage of this irrational reaction of many investors. If you have the extra cash, go and buy more DDD, one of the top stocks to buy. I expect this stock to bounce back to $11 before June.

(Source: Yahoo Finance)

The coronavirus-induced sell-off is not going to cause a prolonged bear market. Contrary to others’ views, the COVID-19 strain of coronavirus is not going to cause a global short supply of goods and/or major disruption in international trade.   DDD and other beaten-down tickers will commence recovery in prices starting next week. Only Q1 2020 shipments will suffer reduction due to coronavirus outbreak. Chinese factories will go full blast again starting April.

The U.S Federal Reserve is already closely monitoring financial markets. It is a clear signal that the Fed will cut rates to stave off investors’ panic/anxiety over coronavirus. Other countries’ central banks might also cut interest rates like what the U.S. Federal Reserve will lo to calm down panicked investors. The fear over COVID-19 coronavirus wiped $5 trillion off global stocks’ value since February 24.

Prompt action by central banks will quickly prevent a repeat of 2008’s global stock market crash. Below is a list of the massive weekly (February 24 to 28) declines in stock market values around the world. It is not only Americans, but all investors around the globe were also infected by the coronavirus fear index.

(Source: New York Times)

Expect Stronger 3D Printer Sales This Year

Going forward, 3D Systems actually has a tailwind from coronavirus. I expect additive manufacturing to grow faster starting this year. It was projected last October that additive manufacturing will only grow at 17.7% CAGR until 2027. But this was before the coronavirus outbreak exposed Chinese factories’ Achilles heel. I expect additive manufacturing go grow even faster, maybe 20% CAGR.

Small and large vendors of manufactured goods will likely purchase more production-grade 3D printers to reduce their reliance on Chinese factories. The extended closure of factories in China means companies that sell cars, smartphones, computers, and other electronic goods saw their stocks thrashed by panicked investors. China accounts for 28.4% of the world’s manufacturing output.

COVID-19’s outbreak in that country caused analysts to predict a notable drop in Q1 product shipments. Nervous investors who dumped their stocks fear it will also affect Q2 shipments.

(Source: Statista)

To prevent a repeat of this scenario, it will be prudent for cash-rich companies like Apple (AAPL) to start building their own additive manufacturing fabrication/assembly plants. Solely relying on others to build/assemble your goods in China is a losing strategy for companies. China is susceptible to new infectious diseases.

Additive Manufacturing Is Cost-Efficient

Like injection molding traditional manufacturing, additive manufacturing or 3D printing can be cost-effective for low-volume and high-volume production. Customers of 3D Systems’ printers were able to produce over 200 million production parts in 2019. Due to the disruptive effect of COVID-19 on China’s factories, 3D Systems printers might help produce 250 million or more production parts this year.

(Source: 3D Systems)

3D Systems offers small and large companies scalable 3D printers for high-volume output. 3D Systems’ Figure 4 Production printer is ideal for high-volume, high-speed fabrication of metal and plastic parts that go into making cars, computers, and smartphones.

(Source: 3D Systems)

Factory-grade 3D printers are still expensive – at least $250,000 for basic Figure 4 production set-up. However, any company will be willing to spend $200 million to buy 3D printers if it will prevent a 10% drop in their $10 billion annual sales.

Stronger Printer & Materials Sales

My fearless forecast is that 3D Systems will wrap up FY 2020 with $680 million or higher in annual revenue. Higher printer sales this year also lead to stronger sales of additive manufacturing materials. As you can see from the chart below, DDD is successfully reducing its operating expenses (down 9% year over year). However, cost reduction will only go so far. 3D Systems needs better sales numbers to become profitable.

(Source: 3D Systems)

Thanks to the panic over COVID-19, we can expect a stronger printer/materials revenue stream for 3D Systems this year. DDD could end 2020 with a net income of $30 million or more.  Divide this amount by DDD’s outstanding shares of 118.51 million and we can expect that FY 2020 EPS would be $0.25.

Next, we use a Forward P/E valuation ratio of 52x and multiply it with $0.25. We get $13. Using 52x is viable. Prior to 2013/2014’s hyped-up valuations, DDD enjoyed P/E ratios that were higher than 50x.

Conclusion

We bet on DDD because we know it is on track to reach $1 billion in annual revenue. Subtractive or traditional manufacturing will eventually give way to the more flexible approach of additive manufacturing. The unwanted coronavirus crisis will compel more companies to rely less on China’s traditional subtractive manufacturing factories. Many vendors of consumer goods will purchase their own high-volume/high-speed 3D printers. Doing so will ensure their products have reliable access to important parts/components.

As a pioneer and leader in additive manufacturing, 3D Systems remains an attractive long-term bet. We should increase our position in DDD while the stock trades below $10. 3D Systems is and will remain the biggest beneficiary of the adolescent additive manufacturing revolution. Many industries are still in the early stages of adopting 3D printing. Manufacturers of electronic products and consumer goods saw their stocks plummet because they are slow adopters of 3D printing.

Sad but true, lack of a charismatic leader is why 3D Systems failed to regain its market-darling status. If Elon Musk buys a controlling stake in 3D Systems, chances are DDD will again trade above $30.  I Know First’s stock-picking AI algorithm is still bullish on DDD ranking it as one of the top stocks to buy. Rather than be infected by the fear over coronavirus, we should instead trust the long-term wisdom of I Know First.


How to interpret this diagram.

Past I Know First Forecast Success with DDD

I Know First has been bullish on 3D Systems stock price in past forecasts. On February 23, 2018, I wrote about DDD another article where I stated that mainstream adoption of home/office 3D printers hadn’t happened yet. At that same time, I analyzed 3D Systems’ brightest hope for reinvigorating its fortune – medical-related applications for restorative and cosmetic dentistry. My guesstimate was that restorative/cosmetic dentistry could contribute as much as $300 million to 3D Systems’ topline starting 2019. Since then, DDD shares have risen 23.82% in line with the I Know First algorithm’s 3 months forecast. See the chart below.

This top stocks to buy with bullish DDD Stock Forecast was sent to I Know First subscribers on February 23, 2018.

Here at I Know First, our stock predictions algorithm has modeled and predicted top stocks to buy price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we have been providing a daily stock market forecast, including S&P 500 forecastgold price predictions, currency forecast and, in particular, the Apple stock forecast. Today, we are producing daily market forecast for over 10,500 assets. These stock market predictions are used by institutional clients, as well as private investors and traders to identify the top stocks to buy in the market and exercise the traded faster than the other market players.

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