Is Velodyne Lidar Stock A Buy?

Velodyne Lidar Inc (NASDAQ:VLDR) is a San Jose, California-based LiDAR company spun off from Velodyne Acoustics. The company gained $150 million worth of investments from Ford (NYSE:F) and Baidu (NASDAQ:BIDU) in 2016, but Ford sold its stake in February to go with its competitor, Argo Lidar.

If Ford is selling its shares, is Velodyne Lidar stock a Buy or a Sell?

Soon after Ford’s announcement, company founder David Hall was removed as chairman and his wife Marta Thoma Hall from her position as marketing chief. The board accused the couple of a lack of honesty, integrity, and candor, which drove share prices down through February.

This all happened less than a year after the company went public through a SPAC reverse merger. That deal with Graf Industrial Corp gave the company a $1.8 billion market valuation. It’s still above that level, but barely treading water.

So what’s next for this pioneering company?

Here’s The Skinny On Velodyne Lidar

As you can assume from its name, Velodyne Lidar creates Light Detection and Ranging equipment. These devices use thousands of laser beams to detect objects and measure distance. It’s a foundational technology used in self-driving cars, drones, and security systems.

Or rather, it’s one of the technologies, as they each depend on a series of sensors. In fact, Tesla (NASDAQ:TSLA) CEO Elon Musk thinks the technology is more of a crutch than a revolutionary breakthrough in the field of autonomous driving.

The company uses a fully automated megafactory in San Jose that reduces the costs of its sensors. And it partnered with Mothers Against Drunk Driving in a pro-autonomous vehicle campaign to help push the technology while striking mass production deals with Nikon and Veoneer.

It was Google’s supplier for the company’s own self-driving vehicle tests in 2010. Past customers include Caterpillar (CAT), Nokia (NOK), Microsoft (MSFT), Tencent, Baidu (BIDU), and TomTom, among others. This drew the attention of Ford (F) and Baidu, each of which invested $75 million.

By 2019, it acquired mapping software and other IP from Mapper.ai and seemed destined for success. But the SPAC launch may be overvalued, leaving some analysts wondering if it’s worth buying.

Is Velodyne Lidar Stock A Buy?

Velodyne Lidar 2020 earnings report shows annual revenue of $95.4 million, which is a drop from $101.4 million in the prior year. And the company reported a GAAP net loss of $149.9 million.

Because it’s relatively new as a public company, we don’t have a lot of information about historical performance. But we do know how well the company did in recent years.

It shipped 4,237 sensor units in the fourth quarter of 2020, a record for the company. And it has a total of 26 active multi-year agreements that will guarantee revenue coming in through the year. This could lead to a stock recovery, but there are some inherent risks of investing at this point.

The stock is still very volatile, and investors will be in for a highly risky and bumpy ride from this point.

Velodyne Top Brass Leaving Is Concerning

The biggest risk of investing in Velodyne is what appears to be a mass exodus from the company. Replacing high-ranking leadership and losing a major shareholder are never good signs. Ford owned a 7.6 percent stake in the company before selling.

And that sale cut the VLDR share price in half within a couple of weeks.

Ford’s stake in Velodyne came six months before it invested in Argo AI, which developed an entire self-driving platform that doesn’t need the LiDAR supplier. Argo is also working with Volkswagen Group, which invested $2.6 billion in the company.

With all the advancements being made in autonomous vehicles in the 2020s, Velodyne is quickly finding itself losing its shine. It’s no longer moving at the trajectory of the 2010s, while the competition is quickly growing.

This begs the question on whether Velodyne can compete with its better-funded rivals.

Can Velodyne Lidar Competitors Win?

Ford (F) has already decided it doesn’t need Velodyne, and Tesla ignores LiDAR technology as a whole.

Musk believes it’s unnecessary technology with no scalability potential. Instead, he focuses on a combination of artificial intelligence, 360-degree video, GPS, and maps data to determine a vehicle’s location and orientation.

This puts a big question mark on whether LiDAR has a future in autonomous vehicles, but it doesn’t necessarily leave it dead in the water.

The company’s sensors have uses in unmanned aerial vehicles and other automated technologies. It could be that we haven’t yet discovered the true functional usage of the technology, which puts it in the league of blockchain – interesting foundational technology with future applications to be determined.

For the company to continue growing, it needs to find its place and grow its market share rapidly.

Is Velodyne Lidar Stock A Buy? The Bottom Line

Velodyne Lidar is a LiDAR supplier based in California that found early success with Google’s initial autonomous vehicle tests in 2010. Since then, it has grown through a series of partnerships and acquisitions that put it front-and-center in the race to develop self-driving cars.

But that success may be in its rearview mirror. It lost one of its biggest supporters in Ford (F), and other companies are gaining exclusive deals with auto manufacturers. It seems like it lost the race to self driving, but the company’s sensors could find another use in the future.

From a valuation perspective, the share price has an upside potential of $23.86 per share based on a discounted cash flow forecast analysis. Price levels exceeding that ceiling would infer that VLDR share price has run past its fair market value.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.