Wolf Richter www.wolfstreet.com [4] www.amazon.com/author/wolfrichter [5]
3D printing popped on the scene a few years ago, and soon it was everywhere. The media were raving about it. Companies were formed and attracted VC money, and the hype bloomed, and soon IPOs of even the tiniest outfits flew off the shelf in the US and Europe. Valuations soared, and everyone was in heaven. Even The Economist [6] jumped on the bandwagon with its article, “A Third Industrial Revolution.” A new world had begun.
But not everyone was a true believer. Among these unwelcome detractors and party poopers was Terry Gou, founder and president of Foxconn, one of world’s largest electronics manufacturing companies. It makes the iPhone and other gadgets. In June 2013, when the Taiwanese media pushed him on 3D printing, he retorted [7], “3D printing is a gimmick” with no “real commercial value.”
Foxconn has been using 3D printing for nearly 30 years, he said. But the technology wasn’t suitable for mass production. You could print a phone, he said, but it would be a useless phone because the technology could not assemble electronic components. That process still required humans or specialized machines.
The modernization of 3D printing didn’t mean “the advent of a third industrial revolution,” he said, debunking The Economist. It was just one of many useful technologies.
His insights were too mundane for the money that went looking for a spiritual place to go. Terry Gou, ultimate industry insider, was ignored (even though I wrote about it [8] at the time, ha!). And valuations skyrocketed.
But at the end of 2013, the phenomenal bubble began to hiss hot air. And since then, it has been tough.
On Wednesday, Stratasys (SSYS), the largest player in the space, warned [9] on revenues and earnings, after having already warned three months ago. For the year, it now expects revenues of $800 million to $860 million. Analysts expected $943 million. Its loss, stuffed with all kinds of write-offs, could reach $245 million, or $4.79 per share. It would be twice as large as its loss in 2013 and 10 times larger than its loss in 2012.
It blamed the “decline in relevant capital spending… particularly in North America”; “a slower than expected channel ramp up” in Asia; and the usual suspects, such as the strong dollar.
Its flagship product, MakerBot – “leading the next industrial revolution,” the company said not long ago – is in deep trouble. Sales plunged 18%. There will be an impairment charge of up to $200 million. Job cuts have already been launched. Capital expenditures and operating expenses will be slashed. Shares plunged 22% on Wednesday and another 6% today, to $37.45, down 73% from their peak at the end of December 2013.
The second largest player, 3D Systems (DDD), is facing a similar scenario. At its peak in early January 2014, the company was worth over $10 billion. Its shares traded at 72 times hoped-for forward earnings. Those hoped-for earnings have since crashed. While revenues increased by 27% to $654 million, profit slumped 73% to $11.6 million.
So it gets worse. On April 24, 3D Systems warned [10] on its outlook, predicting a net loss “in the range of $0.13 per share to $0.15 per share.” The company was “surprised and disappointed by the abrupt interruption in customer demand late in the quarter.” It blamed “macroeconomic pressures,” the dollar, and among other culprits, “the aftershock of lower oil prices,” which “caused the majority of its aerospace, automotive and healthcare customers to curb new printer purchases during the quarter and curtail their materials and service purchases.” Its shares trade at $25.10, down 74% from their peak in early January 2014.
These top two guns are followed in the distance by a gaggle of tiny outfits in the US, Europe, and elsewhere.
There’s Materialise (MTLS). Revenues in 2014 grew 18% to €81 million. Net profits plunged 45% to €1.8 million, but at least it’s a profit. After it went public last summer in the US, its stock soared to a high of nearly $15 a share, then bunny-hopped down 50%.
Then there’s ExOne (XONE) with $44 million in revenues in 2014, up 10%, generating $22 million in red ink. Its shares topped out in August 2013 at $68.50 and have since crashed 80%.
Sweden-based Arcam (ARCM) saw revenues grow 70% to $40 million in 2014. It’s actually profitable. After a parabolic ascent, its shares peaked in November 2013 at 1,073 Swedish Krona but have since plunged 88%.
Germany’s SLM Solutions (XETRA: AM3D), which is into metals-based 3D printing, came in with €36 million in revenues, up 55%, but booked a $5 million net loss. Its shares peaked at €22 in July 2014 shortly after going public and have since dropped only 20% – “only” because that’s a miracle in this space.
Alphaform (ETR:ATF), a German prototyping service, with $30 million in sales and over $3 million in net losses, peaked at nearly €4 per share in Feb 2014 and has since dropped 36%.
Voxeljet (NYSE:VJET), with $20 million in revenues and $5 million in losses, spiked to $59 a share in November 2013, then plunged 86%.
They get smaller as you go, including such stalwarts as Graphene 3D Lab (GPHBF), with a great name, no sales, and only losses. It went public on a wing and a prayer last September while it still could as the bubble was already imploding. Shares made it up all the way to $2.12 but then quickly skittered down 71%.
You get the idea.
After having totally slept through the bubble, even Hewlett-Packard (HPQ) woke up and wants to muscle into the space with some 3D printing products of its own to goose its shares with the “third industrial revolution.” That should be fun.
Manias, like the 3D-printing stock bubble, do something funny to the human brain. Valuations don’t follow rational concepts. Instead, hocus-pocus prevails. New metrics are invented. Conversations over beer or cocktails go haywire. The media love to reproduce the hype without asking questions. Share prices are whipped up by Wall Street and the VC community because it makes them rich. But when these folks exit, the big wealth transfer begins, from those who’re bamboozled into buying the shares to those who dump them. Many billions of dollars have already been transferred. And the bloodletting doesn’t appear to be over.
Other companies too are struggling with crummy revenues and earnings. But heck, they’re redoubling their efforts to get their stocks up. Read… Record Financial Engineering Will Goose Stocks: Goldman [11]