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Why 3d Systems Stock Just Exploded 22% Higher
3D Systems (NYSE: DDD) is printing up some massive profits for investors today. Shares of the 3D printer manufacturer soared 22% through 10:22 a.m. ET Friday after the company announced a four-way partnership among itself, its artificial intelligence (AI) manufacturing software subsidiary Oqton, Daimler Truck/Daimler Buses, and German software protection and licensing solutions provider Wibu-Systems.
Their objective: To facilitate the on-site additive manufacturing of replacement parts for Daimler Buses -- and help forge a market for 3D-produced auto parts that could be worth $7.9 billion annually by 2027.
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What 3D Systems and Daimler are doing
Basically an agreement for "decentralized spare parts production," this partnership makes 3D Systems "a certified 3D printing partner" of Daimler Buses, manufacturing "spare parts locally for various underhood and cabin interior applications, including pins, covers, and inserts." Local production, says 3D Systems, could cut the time needed to get a part to a Daimler bus user by as much as 75%, creating "substantial indirect cost savings by minimizing vehicle downtime due to maintenance."
The company explains that a problem as simple as a lack of "inserts" or a cracked fuse box cover can put a bus out of action for "several weeks" while a replacement part is on order. If the replacement part can be manufactured locally by 3D printing, however, this could reduce out-of-service times from weeks to days.
Initially the partnership will use 3D Systems' SLS 380 for printing plastic parts. Over time the companies will evolve to print metal parts as well.
Is 3D Systems stock a buy?
3D Systems notes that the market for 3D-printed auto parts was worth $2.9 billion in 2022, and is expected to more than double in size by 2027, to $7.9 billion. But this deal might drive even greater growth as it potentially "fundamentally reshap[es] the supply chain for greater resilience and efficiency."
Still, investors should beware of even too-rational exuberance here. While the prospects look rich, 3D Systems stock is currently an unprofitable stock, losing nearly $515 million last year, and with nearly $63 million in negative free cash flow.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends 3d Systems. The Motley Fool has a disclosure policy.
