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How Major Are Velodyne’s ‘Lower Visibility’ Issues? Analyst Weighs In

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Earnings season is in full swing and next week (Feb 25) Velodyne Lidar (VLDR) will report its 4Q results. The lidar maker already gave a taste of what to expect when it made a 4Q preannouncement on Jan 7.

While the company gave a business update on the quarter’s events, Velodyne took its C2021 sales guidance off the table, citing lower visibility for what lies ahead, as the reason for the withdrawal.

Although Craig Hallum analyst Richard Shannon says the cloudy outlook may be related to Covid-19 or supply chain problems, the analyst thinks there are other reasons behind the decision.

“We believe we have identified two potential situations driving these comments: 1) Veoneer’s comments that an OEM customer went with a different LiDAR tech than VLDR’s and 2) reports of Hyundai choosing production-ready Valeo over VLDR,” the 5-star analyst said. “Along with fewer ADAS projects exiting 4Q than the prior quarter, this suggests more difficulties in the auto market that need to be better understood, and we look for VLDR to comment on them when it reports.”

But are these issues major ones, Shannon asks. Here the analyst isn’t sure. The Veoneer matter could be down to several factors. One could be about “long-range, front-facing LiDAR,” where Shannon has already established Velodyne is “not the leader.” The other factor could be about Velodyne’s spinning tech, of which Shannon doesn’t “expect much in auto.”

Additionally, on the Hyundai front, Shannon suspects a “maturity hiccup” maybe behind the auto maker’s decision to choose another partner. Possibly a larger scalability issue is at play, “impacting its ability to win deals now that ramp in C24/25.”

Nevertheless, Shannon remains with the bulls, and believes the fact it is not solely focused on the auto market is a plus. The company has pivoted toward the last mile delivery segment. Here the analyst believes Velodyne is “firmly in the lead.” The company has secured a $316 million contract in this market with a customer, which Shannon “suspects” is Amazon.

That said, Shannon thinks that for the stock to push ahead, it would help if Velodynecan make investors “understand its position within the auto market, and how much applications outside of this space can drive growth over time.”

All in all, Shannon remains “constructive” on VLDR, given the potential for long-term growth, and, therefore, rates the stock a Buy. Meanwhile, his $29 price target suggests a strong upside of ~38% from current levels. (To watch Shannon’s track record, click here)

Shannon is by no means alone in noting Velodyne’s potential. All 6 other recent reviews have reached the same conclusion: Buy. The Strong Buy consensus rating is backed by a $29.83 average price target, which could yield investors returns of 41% over the next 12 months. (See VLDR stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.