We came across a bullish thesis on Xometry, Inc. (XMTR) on Substack by Unconventional Value. In this article, we will summarize the bulls’ thesis on XMTR. Xometry, Inc. (XMTR)’s share was trading at $35.04 as of Feb 11th. XMTR’s forward P/E was 147.06 according to Yahoo Finance.
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Xometry is a digital-native marketplace transforming the custom manufacturing industry with an innovative, fully online process. By leveraging AI and a vast dataset of historical transactions, Xometry offers instant pricing and lead times from a simple CAD file upload, streamlining the procurement process for buyers. Unlike legacy marketplaces that still rely on analog RFQ processes, Xometry provides an end-to-end digital transaction experience, positioning itself as a leader in the digital transformation of custom manufacturing.
The company’s investment thesis is based on three key assumptions: digital-native marketplaces will capture a larger share of transaction volumes in the industry, Xometry is the clear leader among these marketplaces, and the company benefits from significant network effects that extend its competitive advantage. The custom manufacturing industry is highly fragmented on both the supply and demand sides, creating a significant opportunity for a digital-native platform like Xometry to simplify and enhance the procurement process. By eliminating manual back-and-forth and offering instant pricing, Xometry provides a superior user experience that attracts both buyers and suppliers.
Initially, Xometry’s unique data was considered a primary differentiator, but the company has since recognized that data is a prerequisite, not the key differentiator. The true advantage lies in the size and rapid growth of its network. Xometry operates with over 4,000 suppliers, a far greater number than competitors like Fictiv and Proto Labs Network, which have significantly fewer manufacturing partners. On the demand side, Xometry also leads, with over 65,000 active buyers, growing 25% year-over-year, while competitors are seeing flat or declining customer counts.
This expansive network is central to Xometry’s business model. As the platform grows, it attracts more suppliers, which, in turn, makes it even more attractive to buyers. The company’s ability to continuously add new materials, finishes, and processes to its marketplace further strengthens its value proposition. This horizontal expansion allows Xometry to offer a broader range of parts, enhancing its appeal to both new and existing customers. The company’s growing customer base and increased spending per buyer contribute to its strong position in the market.
Xometry stands as the largest digital marketplace in an industry ripe for disruption. The company’s expansive network, growing customer base, and continuous service expansion position it for continued market leadership. With the founders maintaining significant equity ownership and a proven track record of execution, Xometry is well-positioned to capitalize on the ongoing digital transformation of the custom manufacturing industry.
Xometry, Inc. (XMTR) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held XMTR at the end of the third quarter which was 9 in the previous quarter. While we acknowledge the risk and potential of XMTR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XMTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.