On Monday, Cantor Fitzgerald shifted its stance on Ouster Inc. (NYSE: NYSE:OUST), upgrading the stock from Neutral to Overweight. However, the firm simultaneously reduced its price target (PT) to $10.00 from the previous $12.00. The adjustment reflects a more conservative outlook on the company's near-term revenue, with the new PT based on revised delivery and revenue estimates.
Ouster, a provider of high-resolution digital lidar sensors, has seen its shares fall approximately 29% over the past three months. Cantor Fitzgerald views the current valuation as an attractive entry point for investors, despite the reduced revenue expectations.
The firm's revised financial forecasts include a lowered fiscal year 2024 revenue estimate to $111 million from $112.4 million, a fiscal year 2025 revenue estimate to $150.3 million from $175.8 million, and a fiscal year 2026 revenue estimate to $235.3 million from $289.2 million.
The firm also adjusted its fiscal year 2026 operating expense (OPEX) projection to $149 million, down from the prior estimate of $213 million. The revised price target is derived from a relative-multiple-valuation approach, with equal emphasis on the enterprise value to revenue (EV/Revenue) and enterprise value to EBITDA (EV/EBITDA) for the year 2026.
Cantor Fitzgerald's updated outlook accounts for Ouster's guidance and incorporates a more cautious approach to unit delivery expectations. This recalibration has led to the lowered revenue projections. The firm's valuation method assesses Ouster's financial prospects against industry benchmarks to determine the new price target.
The report from Cantor Fitzgerald also outlines key risks that could impact Ouster's performance, including potential supply-chain disruptions, intense competition within the industry, the rate of customer adoption, and the company's ability to maintain pricing power in the market.
In other recent news, Ouster has reported a record revenue of $28 million in the third quarter of 2024, marking the company's seventh consecutive quarter of meeting or exceeding its financial guidance. This success is underscored by the largest purchase order in the company's history for REV7 sensors and the growing popularity of its BlueCity traffic management solution. The company also boasted a significant cash position of $154 million after repaying its credit line.
Looking ahead, the company anticipates revenue for the fourth quarter to be between $29 million and $31 million, with a primary focus on increasing software sales and expanding its installed base. This strategy targets an annual revenue growth of 30% to 50%. However, it's worth noting that the company experienced a sequential decline in sensor shipments for the second consecutive quarter.
In the context of analyst projections, Ouster's robust business model and path to profitability have been acknowledged. The company's record-high software sales and the positive feedback from new software customers, along with strong growth in the robotics sector, have been highlighted.
InvestingPro Insights
Recent data from InvestingPro adds depth to Cantor Fitzgerald's analysis of Ouster Inc. (NYSE: OUST). Despite the lowered price target, the company's financials show some promising signs. InvestingPro data reveals that Ouster's revenue growth stands at an impressive 51.14% over the last twelve months as of Q3 2024, with quarterly revenue growth of 26.41% in Q3 2024. This aligns with Cantor Fitzgerald's expectation of continued revenue growth, albeit at a more conservative rate.
InvestingPro Tips highlight that Ouster "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations," suggesting a solid financial position that could support the company's growth plans. Additionally, the tip indicating "significant return over the last week" (with a 13.33% 1-week price total return) may reflect positive market sentiment following the analyst upgrade.
However, investors should note that Ouster is "not profitable over the last twelve months" and analysts "do not anticipate the company will be profitable this year," according to InvestingPro Tips. This aligns with Cantor Fitzgerald's cautious approach to valuation and revenue projections.
For readers interested in a more comprehensive analysis, InvestingPro offers 9 additional tips for Ouster, providing a deeper understanding of the company's financial health and market position.
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