The military and defense contractors appear poised to come to the rescue of 3D printer makers and 3D printer stocks.
After investors became excited about 3D printing stocks around five years ago, causing them to rise sharply, they have failed to live up to the hype. Demand for 3D printers has been much lower than expected and the prices of 3D printer stocks have collapsed.
3D Printer Demand Could Grow
But there are multiple signs that the U.S. military will create tremendous demand for 3D printers, greatly boosting 3D printer makers’ results and sparking rallies among 3D printer stocks in the process.
One such sign is the partnership between 3D printer maker 3D Systems Corporation (NYSE:DDD) and defense contractor Huntington Ingalls Industries, Inc. (NYSE:HII). Under the deal, which was announced on May 10, the companies will collaborate to produce “high accuracy parts” for Navy ships. In other words, Huntington Ingalls hopes to save time and money by using 3D printing to manufacture parts of Navy ships, for which the specifications must be quite precise.
If the deal does wind up saving Huntington Ingalls a significant amount of time and money, expect other defense contractors to also use 3D printing technology to make parts. After all, word travels quickly among companies in the same sector about successful, time saving innovations. Moreover, the Pentagon, especially under President Trump and at a time of fiscal austerity, is also likely to be interested in saving money and would encourage other defense contractors to utilize 3D printing technology if it sees that doing so cuts costs.
Military, Defense Contractors Could Have Huge Impact on 3D Printing Stocks
There is no doubt that defense contractors have more than enough money to significantly boost 3D printer makers’ results and 3D printing stocks. For example, in 2017, Lockheed Martin Corporation‘s (NYSE:LMT) cost of goods sold, i.e. the amount of money it spent on making its products, came in at $39.75 billion. If Lockheed Martin had spent 1% of its COGS on DDD products in 2017, the 3D printer maker’s revenue, which came in at less than $600 million last year, would have been around 67% higher.
Additionally, the Pentagon and defense contractors could provide the knowledge and capital necessary to help the 3D printer makers greatly enhance their products and expand into new areas.
In fact, the Army is already exploring using 3D printers to make robots, while various military groups are trying to use 3D printers to make food, human limbs, body armor and ballistic missiles. There’s a great chance that the Pentagon — which, after all, does not do most of its own manufacturing — would share any new 3D printing techniques it discovers with American 3D printing companies, much as it shared information it discovered about the internet with American companies.
The Future for 3D Printer Stocks
Meanwhile, one recent study found that the military 3D printing market would reach $4.59 billion by 2025. That’s not too shabby when the market cap of the two leading companies in the sector — 3D Systems Corporation and Stratasys Ltd (NASDAQ:SSYS) — is around $2.8 billion and $1.1 billion, respectively.
It looks like the Pentagon and defense contractors, with their huge coffers and R&D capabilities, are going to rescue 3D printer makers. Investors should buy 3D printer stocks, including 3D Systems stock and Stratasys stock now, while they are still trading at bargain basement levels.
As of this writing, Larry Ramer owns DDD stock and SSYS stock.
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