DALLAS, TX -- January 8th, 2025 -- Valens Semiconductor Ltd.(NYSE:VLN): Stonegate Capital Partners initiates their coverage on Valens Semiconductor Ltd. (NYSE:VLN).
Expanding Growth Opportunities from a Strong Base:
In this constantly connected, highly digitized world, mission critical technologies rely on standard setting performance. This is where Valens excels. As complexity increases in subindustries like autonomous vehicles, online video meetings, factory automation, and robotic control systems, the need for long-reaching, high-speed and error free connectivity becomes crucial. Valens meets this need with its current offerings of futureproof and scalable technologies with applications and design wins in numerous end markets. Given Valens’ 17 years of experience and over 120 patents, we believe the Company is well positioned to capitalize on significant macro trends.
Large Addressable Market: VLN operates in numerous large markets with a combined TAM of approximately $5.5 billion. The biggest near-term opportunities are in the Automotive segment, Pro-AV subsegment, and Industrial Machine Vision subsegment with estimated TAMs of $4.5 billion, $350 million, and $460 million, respectively.
Proven Technology: Valens has 17 years of experience delivering standard-setting technology, supported by over 120 patents. In the automotive sector, Valens has established a long-term relationship with Mercedes-Benz and was recently awarded three design wins with leading European OEMs in addition to ongoing field trials with Stoneridge, a leading global supplier to the transportation industry. The Company is also a Co-Founder of the HDBaseT Alliance, which has over 200 members, headlined by Samsung, LG, and Sony. These proven technologies are the cornerstone of VLN’s value proposition.
Growth Strategy: With Valens’ established leadership in the Pro-AV subsegment, we view the next steps as continued wins in Industrial and Machine Vision subsegment as well as Automotive. It is expected that Industrial Machine Vision will ramp starting in 2026 and 2027, with Automotive ramping in 2027 and 2028. The Company is also poised to capture market share in single-use medical devices in the future. In concert with organic growth, it is anticipated that VLN will continue to pursue strategic acquisitions primarily focused on the Pro-AV and Industrial and Machine Vision markets.
Strong Financial Position: Valens has a robust balance sheet, with $133.1M in cash and equivalents, to support its growth initiatives. Additionally, the Company has improved its working capital position, reducing inventory to $11.7M at 3Q24 from $23.8M at the end of FY22. This has afforded VLN the flexibility to announce its new $10.0M share repurchase program, further delivering shareholder value.
Guidance: The Company expects 4Q24 revenue of between $16.0M to $16.3M and adj. EBTIDA of ($4.9)M to ($4.3)M. This implies full year 2024 revenue guidance of $57.2M to $57.5M and full year adj. EBITDA guidance of ($22.3)M to ($21.4)M. Full year 2025 revenue guidance is expected to range between $71.0M to $76.0M, representing Y/Y growth of ~25% to ~33%.
Valuation: We use a DCF Model and EV/Revenue comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $4.42 to $5.57 with a mid-point of $4.92. Our EV/Revenue valuation results in a range of $4.70 to $5.39 with a mid-point of $5.05.
