As Velo3D Prints Strong Earnings, I’m Boosting the Target and Taking Action
Here’s my plan after this $10K Portfolio member beats expectations.
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Portfolio holding Velo3D (VELO) released second-quarter financial results on Tuesday evening, revealing revenue of $20.664 million, which easily beat expectations for something closer to $13.5 million. On that revenue, gross profit improved to $4.442 million from a loss of $1.588 million, as gross margin improved from negative 11.7% to 21.5%. Total unadjusted operating expenses increased 54.9% to $15.503 million, leaving an unadjusted operating loss of negative $11.061 million, up slightly from the year-ago comparison of negative $11.596 million.
After accounting for interest, other income & expenses and taxes, the unadjusted net loss printed at negative $11.51 million, up from negative $13.263 million. That works out to negative $0.39 per fully diluted share, up sharply from the year ago comp of negative $0.94. Once adjusted, primarily for stock-based compensation, net loss becomes negative $8.974 million, up from negative $11.42 million. That works out to an adjusted loss per share of $0.30, up from a loss of $0.81. Yes, a sharp improvement. Wall Street, however, while apparently impressed with the sizable revenue beat (the stock is trading higher this morning), was looking for something close to negative $0.27. The stock’s move is also based on the firm’s newly issued forward-looking guidance.
The CEO’s Take
“We delivered a strong quarter, with 52.3% year-over-year revenue growth, expanding margins and disciplined execution across our business,” said CEO Arun Jeldi in the press release. “The strength of our results reflects the increasing demand for our advanced metal additive manufacturing solutions, the successful execution of our commercial strategy and our team’s relentless focus on operational excellence. During the quarter, we expanded strategic customer relationships, advanced new partnerships and continued building momentum across the aerospace, defense, energy and space markets, positioning Velo3D for continued growth.”
Jeldi wasn’t done. He added, “Looking ahead, we are entering an exciting new phase for Velo3D with the launch of our Livermore Production Campus, which we expect will triple our manufacturing capacity and become our primary production and manufacturing center. This expansion is expected to significantly enhance our ability to meet growing customer demand, shorten delivery timelines and support larger production programs as additive manufacturing becomes an increasingly important part of next-generation industrial supply chains. With expanded capacity, a strengthened balance sheet and a growing pipeline of opportunities, we believe Velo3D is well-positioned to capitalize on the market opportunities ahead.”
Guidance
For the full year, Velo3D is projecting total revenue of $65 million to $75 million, up from previously issued guidance of $60 million to $70 million. This takes the low end of the range above the $62 million that Wall Street was looking for. The company also sees sequential improvement in gross margin and a gross margin of greater than 30% for the second half of the year; Velo3D is projecting a positive result for earnings before interest, taxes, depreciation, and amortization for the second half of 2026.
Fundamentals
For the first six months of the fiscal year, Velo3D operating cash flow came in at a loss of $39.533 million. On top of that, the company spent $4.458 million on capital expenditures. That works out to a “free” cash flow of negative $43.991 million. The company does not return capital to shareholders.
Moving on to the balance sheet, VELO ended the quarter with a cash position of $91.144 million and inventories of $27.578 million. That left current assets of $156.134 million. Current liabilities add up to $24.648 million, including short-term debt of $3.197 million. That puts the current ratio at 6.33 and its quick ratio at 5.22, which is simply outstanding.
Total assets amount to $200.147 million. There is no claim made for intangible assets of any kind. Total liabilities less equity comes to just $53.608 million. This includes long-term debt of $4.973 million. The entire debt load is more than easily covered by cash on hand. This balance sheet is quite robust.
My Take
I think there’s a lot to like in this release. Sales are running hotter than anyone had expected. margins are growing and expected to grow. It looks this morning that with 31% of the float in short positions following the June 25 short report released by Morpheus Research, that there could be a squeeze that pushes the stock higher in play at the moment. It looks like our portfolio has also been vindicated in adding on weakness in the face of that report. We’ve done well on this one gang. All of you who stuck with us deserve a pat on the back. At last glance, this position is now up 39% since initiation.
Readers will see that VELO is trying to complete what looks to be a cup or “cup with handle” pattern. Both are patterns of bullish reversal. Relative Strength is improving and the daily moving average convergence divergence is now suddenly bullish in appearance across all three components. I do expect to make something of a sale today to try to take advantage of the short squeeze and to create a little cash as the portfolio is down to about $50. Holding the 200-day and 50-day simple moving average would be key right now.
Target Price: $21 (up from $18)
Pivot: 50-day SMA (currently $16)
Add: Down to 200-day SMA (currently $13)
Panic: Loss of 200-day SMA
Upcoming Portfolio Earnings
– Ondas Inc (ONDS) – Ahead of the opening bell on Thursday, Aug. 13. Expected: Adjusted EPS of -$0.07 on revenue of $68 million.
Tuesday’s Intentions vs. Actual Trades
– Purchase 2 shares of RKLB at or close to the last sale of $77.10.
– Bought 2 shares of RKLB at $78.23.
Wednesday’s Intentions
– Sell 15 shares of VELO at or close to the last sale of $16.85.
Current Positions
Long 300 shares of ALTO at $5.0782. Target Price: $8. Last sale: $4.16.
Long 80 shares of EVLV at $5.8959. Target Price: $8.50. Last sale: $6.03.
Long 115 shares of OCUL at $8.3545. Target Price: $11. Last sale: $9.72.
Short one OCUL $11 Sep 18th call at $1.65, Last sale: $0.90.
Long 250 shares of ONDS at $8.4266. Target Price: $14. Last sale: $9.96.
Long 50 shares of PL at $24.4758. Target Price $46. Last sale: $24.10.
Long 8 shares of RKLB at $71.4888. Target Price $101. Last sale: $79.59.
Long 100 shares of SOFI at $15.7153. Target Price: $24. Last sale: $18.21.
Long 50 shares of SWBI at $15.2614. Target Price: $19. Last sale: $14.30.
Long 115 shares of VELO at $12.1201. Target Price: $18. Last sale: $16.85.
Cash: $53.07.
Portfolio Value: $11,613.20, +16.1% from inception on March 24.
At the time of publication, Guilfoyle was long ALTO, EVLV, OCUL, ONDS, PL, RKLB, SOFI, SWBI, VELO and short OCUL.
