On Wednesday, Cantor Fitzgerald adjusted its stance on Ouster Inc. (NYSE: NYSE:OUST), shifting from an Overweight to a Neutral rating. The firm raised its price target to $13.00 from the previous $8.00. This change comes after a significant increase in Ouster's stock price, which has risen approximately 61% since the beginning of the year.
The revision of the price target to $13 reflects an improved outlook on Ouster's financial performance. Cantor Fitzgerald now expects Ouster to achieve a gross margin of 29% for the fiscal year 2024, up from the previous estimate of 20%. This adjustment is based on the company's enhanced margin trajectory following the merger with Velodyne.
Additionally, the firm has reduced its operating expense projections for Ouster, with the fiscal year 2024 estimate now at $131 million, down from $161 million. The forecast for fiscal year 2025 has also been lowered to $132 million from $154 million. These revisions suggest a more efficient cost structure for Ouster moving forward.
Despite the positive adjustments to Ouster's financial estimates, the downgrade to a Neutral rating stems from concerns over the company's current market valuation. Cantor Fitzgerald acknowledges Ouster's strong fundamental position within the LIDAR industry but suggests that the stock's rapid year-to-date ascent may have outpaced its intrinsic value.
The valuation method employed by Cantor Fitzgerald combines a 50% weighting on the enterprise value to revenue ratio for the year 2025 and a 50% weighting on the enterprise value to EBITDA ratio for the same year. This approach has been used to determine the new $13 price target for Ouster's shares.
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