3D Printing Stock Bubble: From Hype to 80% Crash

Key Takeaways

• 3D Systems hit about $97 and Stratasys about $136 in early January 2014 before collapsing.
• New 2013 IPOs ExOne and Voxeljet soared on hype, then fell 80 percent or more.
• A basket of the four big names lost roughly 71 to 80 percent into 2015.
• The real technology grew, but valuations priced a revolution that arrived slowly.

Background

Additive manufacturing, the technical name for 3D printing, builds objects layer by layer from a digital file instead of cutting them from a block. The core patents date to the 1980s, and the two industry leaders, 3D Systems (NYSE: DDD) and Stratasys (NASDAQ: SSYS), had sold industrial machines for years. What changed around 2012 was the story attached to the technology, not the technology itself.

Press coverage began describing a coming "third industrial revolution," in which households would print spare parts at home and factories would be rebuilt around desktop machines. Key early patents were expiring, which promised cheaper consumer printers. That narrative turned two mid-cap industrial-equipment makers into thematic growth stocks, and it pulled in money looking for the next transformative trend.

The hype produced a wave of new listings. ExOne (NASDAQ: XONE), which makes industrial binder-jetting systems, went public in February 2013 in the sector's first pure-play IPO. Voxeljet (NYSE: VJET), a German maker of large-format industrial printers, followed in October 2013. Both were small, barely profitable companies, and both were swept up by demand for anything labeled 3D printing.

By late 2013, the sector traded less on current sales than on a forecast of explosive future growth. Analysts cited industry projections of growth above 19 percent a year through 2021, per contemporaneous reporting. That expectation, not present-day cash flow, was the foundation under the prices.

What Happened

The mania built through 2013 and topped out at the turn of 2014, then unwound over the next 18 months.

• February 7, 2013: ExOne prices its IPO at $18.00 per share and jumps about 47 percent on its first day, the biggest first-day pop of any 2013 IPO to that point.
• June 19, 2013: Stratasys agrees to buy desktop-printer maker MakerBot in a stock deal initially valued at $403 million, with earn-outs that could lift it toward $604 million.
• October 18, 2013: Voxeljet prices its IPO at $13.00 per share and roughly doubles intraday, valuing the company near $400 million.
• January 3, 2014: 3D Systems reaches an all-time high near $97 and Stratasys near $136, marking the top of the cycle.
• January 2014: Stratasys cuts 2014 guidance below consensus and ExOne cuts revenue guidance; Citron Research publishes a bearish report on 3D Systems.
• December 28, 2015: 3D Systems announces it will discontinue its Cube consumer printer and exit the consumer market.

The two newly public stocks ran the hottest. ExOne went out at $18.00, rose about 47 percent on day one, and topped out near $68.50 in August 2013, per later reporting. Voxeljet priced at $13.00, traded as high as $27 on its first day, and closed near $23.80, an opening-day gain of roughly 83 percent, before peaking around $59 that November.

The reversal began almost the moment the stocks peaked. In January 2014, Stratasys guided 2014 earnings to $2.15 to $2.25 per share against a $2.33 consensus, and ExOne warned that several printer sales had slipped from 2013 into 2014, knocking its shares down by close to 20 percent including after-hours trading. On January 24, 2014, short-seller Citron Research issued a report on 3D Systems with a near-term price target of $56, arguing the company's growth was bought through acquisitions rather than earned organically.

From there the decline was steady and broad. By the end of 2014, 3D Systems had lost about 65 percent of its market value, Voxeljet about 77 percent, and ExOne about 70 percent, per contemporaneous coverage. The damage deepened into 2015. By an April 2015 tally, Stratasys was down roughly 73 percent from its late-2013 peak, 3D Systems about 74 percent, ExOne about 80 percent, and Voxeljet about 86 percent. TIME reported in August 2015 that the four leading names had lost between 71 and 80 percent of their value over the prior 17 months.

Why It Happened

The 3D printing stock bubble was a story-driven mania layered on top of a genuine, but slow, technology. Several forces combined to inflate it and then to pop it.

The first was a powerful narrative with a long time horizon. "A printer in every home" and a "third industrial revolution" are exciting ideas, and they are also unfalsifiable in the short run. A pitch that can only be tested over a decade lets investors justify almost any price today, because the disappointment is always supposed to arrive later.

The second was extreme valuation on a price-to-sales basis. At the January 3, 2014 peak, 3D Systems traded at about 21 times sales and 209 times trailing earnings, while Voxeljet traded near 56 times sales, according to a later Motley Fool valuation review. Those are multiples that require years of flawless, rapid growth just to grow into the price. When a stock is priced at 21 or 56 times revenue, a single soft quarter can erase a large fraction of the market value.

The third was a flood of supply meeting that demand. The sector went from no pure-play public stocks to several in under a year, as ExOne and Voxeljet listed and Stratasys bought MakerBot to chase the consumer market. New issuance near a peak is a classic late-cycle signal, because companies and insiders sell stock when buyers will pay the most.

The fourth was that the consumer-printer thesis simply did not pan out. Desktop machines were finicky, slow, and limited in what they could make, so households did not adopt them the way the story predicted. Stratasys had paid up for MakerBot to own that market, and when consumer demand stalled, the acquisition turned from a growth engine into a source of large writedowns.

The fifth was the ordinary mechanics of growth-stock disappointment. These companies were priced for acceleration, so even solid revenue growth that fell short of expectations was treated as failure. 3D Systems grew revenue about 27 percent in 2014, yet its stock still fell sharply because profit dropped and growth decelerated against a sky-high bar.

By the Numbers

• 3D Systems (DDD) peak: all-time high near $97 on January 3, 2014. (Contemporaneous market data)
• Stratasys (SSYS) peak: roughly $136 in early January 2014. (Contemporaneous market data)
• ExOne (XONE) IPO: priced at $18.00 on February 7, 2013; up about 47 percent on day one; peak near $68.50 in August 2013. (Contemporaneous reporting; TIME; Wolf Street)
• Voxeljet (VJET) IPO: priced at $13.00 on October 18, 2013; closed near $23.80, up about 83 percent; peak near $59 in November 2013. (Fox Business; Wolf Street)
• Peak valuation multiples: at the January 3, 2014 top, DDD about 21x sales and 209x earnings; VJET about 56x sales; XONE about 22x sales; SSYS about 16x sales. (The Motley Fool)
• MakerBot deal: initial value $403 million on June 19, 2013, with earn-outs up to about $604 million. (Stratasys press release / Form 6-K)
• Stratasys 2014 results: revenue $750.1 million, GAAP net loss of $119.4 million, or $2.39 per share, including a $102 million MakerBot goodwill impairment. (Stratasys press release / Form 6-K)
• Sector decline: by April-August 2015, the four big names were down roughly 71 to 86 percent from their peaks. (Wolf Street; TIME)

Aftermath

The unwind was severe and lasting. Wolf Street's April 2015 tally put Voxeljet down about 86 percent and ExOne about 80 percent from their highs, with 3D Systems and Stratasys each down in the low-to-mid 70s. The two new IPOs never returned to their first-week levels, and the leaders spent years grinding lower.

Stratasys bore the clearest financial scar from the consumer bet. Its 2014 net loss of $119.4 million was driven largely by a $102 million goodwill impairment on MakerBot, the desktop-printer maker it had bought near the top. The company took further MakerBot impairments through 2015 as the unit's revenue growth collapsed from roughly 80 percent year over year to single digits, an admission that it had badly overpaid for the consumer dream.

3D Systems formally abandoned the consumer market it had once chased. On December 28, 2015, it announced it would discontinue its $999 Cube printer and wind down its Cubify consumer platform, and its stock fell more than 9 percent that day. The company recorded inventory writedowns and related charges tied to the exit, and its longtime chief executive had departed weeks earlier.

There were no criminal charges or fraud findings tied to this episode; it was a valuation bubble, not a scandal. The technology kept improving and the industry kept growing, but at the slower, mostly industrial pace skeptics had predicted rather than the consumer revolution the prices implied. Years later the survivors became targets in a wave of consolidation, with Nano Dimension, Desktop Metal, and 3D Systems all maneuvering around Stratasys before Nano Dimension agreed to buy Desktop Metal for $183 million in 2024, a fraction of the values once attached to the sector.

Lessons for Investors

1. A real technology is not the same as a good investment. 3D printing was, and is, a genuine and growing field, yet the stocks still fell 70 to 80 percent. The bubble was never about whether the technology worked; it was about the price. When you find yourself defending a stock by describing how important the technology is, you have changed the subject away from valuation, which is the only thing that determines your return.

2. Price-to-sales multiples in the double digits price perfection. At the peak, Voxeljet traded near 56 times sales and 3D Systems near 21 times. A company can grow fast and still be a terrible investment at those multiples, because the price already assumes years of flawless execution. When you pay 20 or more times revenue, the only direction left for the multiple is down, and it usually takes the price with it.

3. Watch the supply of new stock near a peak. The sector went from zero pure-play listings to several inside a year as ExOne and Voxeljet came public and Stratasys issued shares to buy MakerBot. Insiders and companies tend to sell stock when buyers are most eager, so a rush of IPOs and acquisitions in a hot theme is a warning that the smart money is taking the other side of your trade.

4. A long, unfalsifiable story is the dangerous kind. "A printer in every home" could not be disproven in any single quarter, so it justified high prices long after the evidence turned. Stories you cannot test for years are exactly the ones that let a bubble run, because each disappointing result can be waved away as too early. Demand milestones with dates, not just a vision.

5. Decelerating growth punishes a momentum stock even when sales rise. 3D Systems grew revenue about 27 percent in 2014 and its shares still cratered, because the market had priced acceleration and got deceleration instead. When a stock is valued for hypergrowth, merely good results read as failure. Know what growth rate the price is assuming before you buy, because that, not the headline growth number, is the bar the company must clear.

Frequently Asked Questions

What was the 3D printing stock bubble in simple terms? The 3D printing stock bubble was a 2012 to 2014 mania in which investors bid up shares of additive-manufacturing companies on hype about a coming manufacturing revolution. The leading stocks peaked in early 2014, then fell roughly 70 to 80 percent as growth disappointed.

Why did the 3D printing stock bubble happen? A compelling but slow-to-arrive story about home printing and a "third industrial revolution" let investors justify extreme prices, with some stocks trading above 20 or 50 times sales. A flood of new IPOs met that demand, and when consumer adoption and revenue fell short of the hype, the valuations collapsed.

Which stocks were involved and how far did they fall? The main names were 3D Systems (DDD), Stratasys (SSYS), ExOne (XONE), and Voxeljet (VJET). From their late-2013 and early-2014 peaks, they fell roughly 71 to 86 percent into 2015, with the newer IPOs ExOne and Voxeljet among the hardest hit.

Could the 3D printing stock bubble happen again today? Yes, the same pattern recurs in any hot theme, from cannabis to artificial intelligence. The specific names change, but the mix of a real technology, an unfalsifiable story, double-digit price-to-sales multiples, and a wave of new issuance is a repeatable recipe for a bubble.

What is the main lesson from the 3D printing stock bubble? The most transferable takeaway is that a transformative technology can be real while its stocks are still wildly overpriced. Judge the investment by the valuation and the growth the price assumes, not by how exciting the technology is.

Sources

1. Stratasys Ltd. Stratasys to Acquire MakerBot, Merging Two Global 3D Printing Industry Leaders (June 19, 2013; filed with the SEC on Form 6-K). https://investors.stratasys.com/news-events/press-releases/detail/19/stratasys-to-acquire-makerbot-merging-two-global-3d
2. Stratasys Ltd. Stratasys Reports Fourth Quarter and Fiscal Year 2014 Financial Results (filed with the SEC on Form 6-K). https://investors.stratasys.com/news-events/press-releases/detail/271/stratasys-reports-fourth-quarter-and-fiscal-year-2014
3. Citron Research. Citron's Initial Report on 3D Systems (DDD), January 24, 2014. https://citronresearch.com/wp-content/uploads/2014/01/DDD-final-Jan-24-2014-a.pdf
4. The Motley Fool. Why 3-D Printing Stocks Crashed at the Outset of 2014 (Jan. 30, 2014). https://www.fool.com/investing/general/2014/01/30/why-3-d-printing-stocks-crashed-in-2014.aspx
5. The Motley Fool. How 3D Printing Stocks' Valuations Stack Up in 2015 (Jan. 17, 2015). https://www.fool.com/investing/general/2015/01/17/3d-printing-stocks-valuations-stack-up-2015.aspx
6. TIME. 3D Printing Stocks Are Suffering in 2015 (Aug. 11, 2015). https://time.com/3916323/3d-printer-stocks/
7. Wolf Street. Stocks in This Totally Hyped Sector Are Crashing (Apr. 30, 2015). https://wolfstreet.com/2015/04/30/did-you-see-the-bubble-in-3d-printing-stocks-implode/
8. Fox Business. 3D Printer Maker Voxeljet Shares Double in IPO Debut (Oct. 18, 2013). https://www.foxbusiness.com/features/3d-printer-maker-voxeljet-shares-double-in-ipo-debut.amp

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.