Is Ouster (OUST) Undervalued Following Its Seneca Drone Partnership?

Ouster (OUST) is back in focus after announcing a partnership with Seneca to integrate its Rev8 native color lidar into Seneca’s autonomous drone platform for wildfire, mapping, and infrastructure missions.

The Ouster share price has reacted sharply to this Seneca partnership, with an 8.61% 1 day share price return adding to a 27.45% 30 day share price return and an 89.94% year to date share price return, while the 3 year total shareholder return is very large and the 5 year total shareholder return remains negative. This suggests strong recent momentum layered on a volatile longer history.

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After a surge like this, the real tension sits between a US$44.39 share price and a wide spread of fair value estimates. Where does Ouster actually screen on valuation now?

Most Popular Narrative: 23% Undervalued

At a last close of $44.39 versus a most followed fair value of $57.83, the current Ouster valuation narrative leans heavily on long term lidar demand and higher margin software to bridge that gap.

Ouster is tapping into the massive Intelligent Transportation Systems (ITS) market with their Blue City traffic management solution, which could drive significant revenue growth as they expand deployments across the US, Europe, and Asia. This is expected to positively impact revenue.

See why 76 investors see Ouster as 23% undervalued.

Result: Fair Value of $57.83 (UNDERVALUED)

Still, the Ouster story can break if intense lidar competition squeezes pricing or if ongoing losses and litigation costs weigh more heavily on future cash generation.

Find out about the key risks to this Ouster narrative.

Another View On Ouster Valuation

The picture looks different when shifting from fair value estimates to a straightforward price-to-sales (P/S) comparison. Ouster trades on a 15.6x P/S multiple, compared with 3.1x for the US Electronic industry and 2.7x for peers, while the fair ratio stands at 5.7x. This represents a substantial premium and raises the question of whether the market is overpaying for the lidar narrative in this case.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Feeling the mixed mood around Ouster after this move. Act quickly, review the numbers and risks yourself, then weigh up the 3 key rewards and 3 important warning signs.

Looking for more ideas beyond Ouster?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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