Detect an Opportunity and Buy the Pullback in Velodyne Stock

Velodyne (NASDAQ:VLDR) recently went public via a merger with a special purpose acquisition company (SPAC). Given this big opportunity, you’d think Velodyne stock would be trending higher. Yet, shares in the autonomous vehicle (AV) play have headed lower since its deal with Graf Industrial closed earlier this month.

Image of the Velodyne Lidar (VLDR) sign outside the company's headquarters.
Source: jejim / Shutterstock.com

Does this mean stay away? Not so fast.

Sure, after soaring in the months leading up to the deal’s close, Velodyne stock has shrunk almost in half from its highs. However, the underlying fundamentals remain unchanged.

How so? As a maker of lidar (light detection and ranging — essentially, laser radar), Velodyne is a pure play on the future of AV. Sure, lidar-based systems are more expensive than camera-based ones. But, as costs come down, you should expect this technology to become the backbone of AV infrastructure.

Put simply, this company’s growth train is set to continue, as AVs gain critical mass. And self-driving vehicles aren’t the only end market for this company– its technology could be marketed to other emerging industries.

From smart infrastructure to drones, there’s a lot of potential runway here. Of course, it’ll take years for everything to play out. But with shares selling off as of late, now’s the time to get in on the ground floor.

Velodyne Stock, Lidar Tech and AVs

Like the rise of electric vehicles, the rise of AVs is another fast-moving megatrend in the automotive space. Velodyne offers investors a piece of that trend, with products tied up in self-driving vehicles, smart infrastructure, and unmanned delivery.

As I mentioned before, lidar allows self-driving vehicles to safely move from point A to point B. And while there’s a debate in the AV sector over whether lidar or camera-based systems are best, most agree that lidar is the future of the industry. In a research note from Oct. 1, Baird analyst Tristan Gerra said camera limitations mean lidar will eventually become “an integral part” of AV sensor systems.

What does this mean for Velodyne stock? Already a leader in its space, you can expect the company to continue its strong sales growth. Consensus calls for sales to soar about 50% over the next year. Based on Gerra’s estimates, sales could reach $684 million by 2024.

So, with these prospects, why have shares sold off in recent weeks? There must be a good reason why investors have let off the gas, right?

Don’t Let The Selloff Spook You

Despite shares falling nearly 50% recently, you shouldn’t let it scare you off a great long-term opportunity. That’s because September’s tumbling share prices can be chalked up to a couple of factors.

Firstly, news of potential increased regulations has sent SPAC stocks lower in recent weeks. What’s more, investors may be selling in anticipation of insider selling. With insiders able to sell shares on the open market just 60 days after the merger’s close on Sept. 29, many who rode this stock over the summer are trying to lock in their gains.

While both factors have hurt Velodyne for now, what’s most important to remember is that neither impacts the company’s long-term bull case. Sure, it may be a while before shares rally. But with this downward pressure, investors searching for a long-term AV bet can now get in at a reasonable price.

It’s not all said-and-done, but most likely lidar will become the backbone of AVs. And, as automakers across the globe pivot towards self-driving vehicles, expect this company to become a integral supplier.

If you need anymore assurance, too, you should also consider the fact that the AV story isn’t the only long-term catalyst here. Secondary catalysts include lidar’s potential use in “Smart Cities” down the line, as well as drone technology. Basically, there’s plenty of room for Velodyne stock to be a winner in your portfolio.

Bottom Line

Non-fundamental factors have sent this AV play lower, and Velodyne remains a strong investment. With the growth still in motion, now’s the time to throw your name in the hat at a reasonable price. Sure, it may take a while for this story to be told. But, with the distinct possibility of sales skyrocketing by 2024, it’s clear that now is the time to strike.

Take advantage of the pullback and buy Velodyne stock while you can.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Matthew McCall left Wall Street to actually help investors –by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.


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