VLD - Velo3D: No Room For Error

2024-04-02 07:21:57 ET

Summary

• Velo3D's stock has rebounded in recent weeks, but the company's balance sheet will make a successful turnaround difficult.
• While Velo3D has aggressively cut costs and is now generating orders again, there are doubts about utilization in the field.
• Most of Velo3D's sales are to customers in less economically sensitive industries, making it difficult to blame the current situation on the demand environment.

Velo3D's ( VLD ) stock is up significantly off the lows of early 2024, although the merits of this move are questionable. I suggested in December that executive turnover and a strategic realignment were indicative of larger issues. I did not expect the business to come to a virtual standstill in the fourth quarter though. While the company is engaged in a turnaround effort, ongoing losses and a weak balance leave no room for error. Cost cutting efforts should help to reduce losses but there appears to be a demand problem and it is not clear that this is the result of macro conditions....

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