Ouster ( NYSE: OUST ) stock slid sharply on Wednesday after Baird downgraded the stock due to low visibility into 2023.
Equity analyst Tristan Gerra cited a weakening macro backdrop for the downgrade from a Buy-equivalent to Neutral and a lack of visibility into 2023. While a proposed merger with Velodyne Lidar ( NASDAQ: VLDR ) is viewed as a potential benefit to the company’s cash position, it could also add to issues for the company in the nearer term and shares too similar a product portfolio.
“Downgrading OUST on a weak macro outlook, not on company fundamentals,” Gerra clarified. “However, Velodyne could add a revenue and gross margin burden in the medium term, in our view.”
Velodyne is seen as carrying more issues than benefits for Ouster. Gerra indicated that the merger may bring a declining business on board with Ouster rather than a partner in growth, the analysis said.
“We note Velodyne has lost significant design wins since going public, with revenue this year expected to be just above one-third of 2020 run rates,” Gerra noted. “Velodyne notably has lost automotive design wins, while Amazon has placed its Scout home-delivery project on hold.”
Shares of Ouster ( OUST ) skidded 12.4% and Velodyne stock slumped 9.04% .
Read more on Ouster’s latest earnings release .
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Baird shifts to the sidelines on Ouster amid macro, merger uncertainty