3D Printing Industry Won't Be 'Tested' Until Hewlett-Packard, Others Arrive

Many investors expected the 3D printing industry to explode. This was heavily influenced by the belief that everyone would eventually be able to print anything at any time. Those expectations could be overblown, however.

As of this writing, Stratasys, Ltd. (NASDAQ: SSYS), 3D Systems Corporation (NYSE: DDD) and ExOne Co (NASDAQ: XONE) are down a significant amount on Tuesday. Stratasys leads the declines with more than 30 percent taken by investors who exited their positions.

"The 3D printing space was my largest short last year," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "That was one of my best shorts of the year. I basically came into the beginning of 2014 short a basket of 3D printing names. 3D printing got washed up into that pretty good."

Related Link: Why Investors Are 'Fundamentally Wrong' About 3D Printing Stocks

The Test Is Coming

Hewlett-Packard Company (NYSE: HPQ) has been one of Udall's favorite 3D printing stocks for a few years, but the firm didn't announce its first 3D printer until 2014. He also likes Autodesk, Inc. (NASDAQ: ADSK).

"Basically, my whole premise on 3D printing was that the space wouldn't really get tested until big companies came in and disintermediated the space," said Udall. "Meaning [firms like] Hewlett-Packard. Could Dell get into it? IBM? Microsoft? And so on and so forth."

Udall noted that Hewlett-Packard is only a few months (or at the most a few quarters) away from releasing its first 3D printer. He said 3D printing is an area where there will end up being a lot more competition as additional firms enter the fray.

"At certain prices these stocks do become interesting," he said. "At $52.21, the low of the day on Stratasys, I almost bought some. I'm gonna watch it and see. If these guys get cheap enough, I might start trying some trades. There is a price for everything."

Despite his concerns, Udall said that he believes the industry has long-term viability.

"But again, some of my favorite 3D printing stocks have yet to enter the space," Udall added. "I think once they enter the space you're going to see a whole new level of price competition. It's going to be pretty disruptive to guys that were considered to be the leaders in the space, like 3D Systems and Stratasys."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.