Crazy enough to work?

ddd 3d printing stocks
Sponsored By:

DDD Buyout Watch: Will HP Snap Up This 3D Printing Stock?

3D Systems (DDD) is one of the hottest stocks on Wall Street with 40% gains year-to-date vs. 15% for the S&P 500, and DDD stock has shot up more than 400% since 2012 while the S&P is up just 22%.

As the name implies, DDD is a 3D printing stock focused on the up-and-coming industry that involves high-tech manufacturing and on-demand production of custom parts. But with just a $5 billion market capitalization, DDD stock is a prime target for a buyout by a bigger competitor to take its operations to the next level.

And one suitor that DDD stock investors might be seeing more attention from is embattled tech giant Hewlett-Packard (HPQ).

Why would HP buy out DDD stock — or competitor Stratasys (SSYS) or any other 3D printing stock, for that matter?

Well, here are a few reasons:

  • HP is in Trouble: Hewlett-Packard is in deep trouble as the stock imploded after earnings last week. HPQ stock dropped more than 10% on news that it might not grow sales at all in 2014, and that management was being shaken up again as the beginning stages of a five-year turnaround plan continue to fall short.
  • HP needs a change: Many businesses that rely on laptop and desktop sales have been upended by the move to mobile, including Intel (INTC), Microsoft (MSFT) and Dell (DELL). And all are looking to do something fresh and different — either in the mobile space or in something completely different. Why not 3D printing via a DDD buyout?
  • HP has the cash for a DDD buyout: HPQ boasts $13.2 billion in cash and short-term investments. It can easily gobble up 3D Systems, even after paying a premium on current DDD stock valuations.
  • DDD has regular printing power, too: While investors love the 3D printing segment, DDD also has a host of software and staff that could help HP and its conventional printing and imaging segment. HP remains tied to its imaging business, which includes high-quality industrial printing as well as just those ubiquitous inkjets, and DDD know-how could perhaps refresh the brand or at least provide economies of scale within Hewlett-Packard.

Crazier things have happened — and considering the debacles at HP including the Autonomy buyout and the Palm acquisition, it’s not like an ill-advised deal for DDD would be a complete surprise.

But HP better act fast. A Citigroup analyst just initiated coverage on DDD stock with a “buy” rating, so the longer it waits the more expensive 3D systems could become.

Related Reading

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

Get The Slant delivered to your inbox every day!

Comments
  • SunnyDeigo

    Meg is in over her head. Selling beanie babies on ebay was one thing. It didn’t qualify her for struggles and reinvention.

  • Ethu18

    It would make sense for HP or Dell to buy DDD but it would make more sense for Apple, Android, Microsoft or Amazon. For the first 3 it would help put customers in their ecosystem and utilize their app store. Developers will write applications that will make the product from the printer and customize it through the application. The reason Amazon would be a buyer is because imagine buying an item from Amazon and having the option for prime members to have the product made by the 3D printer. This would save them on shipping cost and provide an exclusive reason to buy on Amazon.

  • Vincent Ventures

    HP might have the cash to buy 3D systems at it’s current market cap at 5.3B but would it buy 3D systems at it’s current loft P/E ratio of 116? Seems like it would make more sense for HP to buy out a smaller company for the intangible resources, such as technology and patents, such as Arcam AB.

  • Jean Park

    These 3D printing stocks are amazing. I just hope HP would think about this possible buyout. These stocks would surely help HP in uplifting its name as the leader in printing.

    -http://www.usprinterparts.com/