Velodyne Lidar, Inc. (VLDR) is a lidar technology company, which recently went public following a reverse merger with Graf Industrial Corporation. It began trading on the NASDAQ global select market on September 29^th. The company is developing numerous self-driving programs, which, if proved to be safe and efficient, could revolutionize the automobile industry.

VLDR expects self-driving technology and Advanced Driver Assistance Systems (ADAS) to be integrated in EVs within the next two years. However, commercial deployment of this technology is still in its infancy, making it a largely speculative investment bet currently.

VLDR has lost 33.1% since its market debut. This, combined with several other factors, has led to a “Sell” rating for VLDR in our proprietary rating system.

Here’s how our proprietary POWR Ratings system evaluates VLDR:

Trade Grade: F

VLDRs currently trading above its 200-day moving average of $14.51, but below its 50-day moving average of $15.71, which does not indicate a significant uptrend. In fact, the stock declined 37.2% over the past three months, reflecting short-term bearishness.

VLDR recently collaborated with Ford Otosan in developing its heavy commercial trucks and next generation vehicles. The company also entered into a multi-year sales agreement with Local Motors. Under this agreement, Local Motors is afforded unrestricted access to VLDR’s lidar sensors to develop its self-driving electric shuttle Olli.

However, despite these positive developments, the company’s results for the third quarter ended September 2020are far from impressive. VLDR incurred a non- GAAP net loss of $9.10 million, with a $0.06 loss per share. Operating loss for the three-month period amounted to $2.74 million.

Buy & Hold Grade: F

In terms of proximity to 52-week high, which is a key factor that our Buy & Hold Grade considers, VLDR’s positioning is not favorable. It is currently trading 53.8% below its 52-week high of $32.50, which it hit on September 10^th.

VLDR’s revenue and working capital declined 29.1% and 19%, respectively, year-over-year.

VLDR, which recently went public, formulated its marketing strategy around its autonomous driving technology. However, in the absence of a  prototype, investors have remained bearish about the stock, especially after several fraudulent allegations were made against Nikola Corporation (NKLA) a couple of months ago.

Peer Grade: D

VLDR is currently ranked #55 out of 61 stocks in the Industrial – Machinery group. Other popular stocks in this space are 3M Company (MMM), Caterpillar, Inc. (CAT) and Deere & Company (DE).

DE, CAT and MM gained 19.9%, 19%, and 3.2%, respectively, over the past three months. This compares to VLDR’s negative returns over this period.

Industry Rank: B

The Industrial – Machinery group is ranked #8 out of 123 industries in the StockNews.com universe. Total industrial production rose 1.1% in October, which is a clear sign of a recovering economy. The utility output rose 3.9% in the October, while manufacturing output increased 1% over this period. The ongoing fiscal stimulus talks in Washington DC and positive vaccine development bode well for this industry.

Overall POWR Rating: D (Sell)

VLDR is rated “Sell” due to its short-and-long-term bearishness, bleak growth prospects and declining financials, as determined by the four components of overall POWR Rating.

Bottom Line

While VLDR’s proprietary technology seems promising, no evidence of the efficacy of its autonomous driving technology is currently available. This, combined with declining prices over the past couple of months, makes VLDR an extremely risky investment right. Thus, it is advisable to wait for the launch of at least a prototype of its state-of-the-art technology and its integration with EVs before investing in the stock.

Analysts expect VLDR’s EPS to rise 79.4% next year. The consensus revenue estimate of $150.60 million for next year indicates a 49.2% rise from the year-ago value. However, it will take some time for the company to become profitable.

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VLDR shares were trading at $15.12 per share on Friday afternoon, up $0.12 (+0.80%). Year-to-date, VLDR has gained 48.38%, versus a 16.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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