- Velodyne Lidar Inc (NASDAQ:VLDR) disclosed offering 40 million warrants at $4.18/share to Amazon.com Inc (NASDAQ:AMZN), with full vesting contingent on $200 million of sales from Amazon. Velodyne will issue a warrant to a subsidiary of Amazon to acquire up to 39.6 million shares.
- Amazon is a well-rumored customer, specifically for last-mile delivery applications. Craig-Hallum analyst Richard Shannon believes overlap with a $318 million contract Velodyne highlighted in its SPAC process, so the stock being up 60% in the aftermarket seems like "an overreaction" at first glance.
- Shannon also points out that this warrant deal makes this revenue stream more specific, but there are no large purchase orders in place at this time.
- Lastly, Amazon implicitly confirms a large-scale need for lidar in non-automotive applications, which should provide a lift for all lidar companies with focus there, specifically Ouster (NYSE:OUST), the analyst argues.
- Shannon has a Hold rating and a price target of $3.50 (7.2% downside to February 7, 2022, closing price of $3.77) on Velodyne's shares.
- BofA analyst John Murphy said the motivation, industrial logic, and impact of the transaction are "not entirely clear."
- He also noted that Amazon frequently makes minority investments in companies via warrants, and said details around the transaction contained in the warrant agreement are "lacking."
- From Velodyne's perspective, the transaction makes sense to fortify an existing customer/partner relationship with Amazon and gain a public endorsement for the theoretical value of the company's equity. Still, this agreement also may incentivize Amazon to award Velodyne additional commercial agreements.
- While the endorsement is "helpful," he maintains an Underperform rating on Velodyne, given his view that the future for commercially-targeted LIDAR is "far from clear."
- Additionally, the company appears to be lagging behind its closest peer Luminar Technologies Inc (NASDAQ:LAZR), in booking multi-year contracts for automotive/ADAS/AV series production.
- Price Action: VLDR shares traded higher by 0.50% at $4.06 in the premarket session on the last check Wednesday.
