Velo3D Nears SPFR Merger Date, Stock Is a Good Long-Term Investment

Mohit Oberoi, CFA - Author

Sep. 28 2021, Published 8:14 a.m. ET

Jaws Spitfire Acquisition Corp. (SPFR) stockholders will vote on Sept. 28 on the business combination with 3D printing manufacturer Velo3D. Many of the stocks that have gone public through a SPAC merger have risen around the merger date. Will Velo3D stock follow the same trajectory and go up after the SPFR merger?

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Unlike most other SPACs that have gone through a boom-bust cycle in 2021, SPFR stock has been stable. Currently, it trades near the SPAC IPO price of $10 and has a 52-week range of $9.81–$12.10. Now, that’s quite a narrow range considering the extreme volatility that we’ve seen in other SPACs.

Cathie Wood has been buying Velo3D stock

Known for her flair for identifying disruptive technologies and identifying companies like Square and Tesla early, Cathie Wood has also been loading on some of the SPACs. SPFR finds a place in the ARK Space Exploration & Innovation ETF (ARKX) and the ARK Autonomous Technology & Robotics ETF (ARKQ).

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SPFR forms 1.2 percent and 1.38 percent, respectively, of ARKQ and ARKX. Wood is known to back companies that she likes and buys them in more than one ETF. However, SPFR doesn't form part of the ARK 3D Printing ETF (PRNT).

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PRNT is a passive ETF and tracks the performance of the Total 3D-Printing Index. Overall, ARKQ and ARKX hold almost 4 million shares in SPFR, which is a sizeable stake in the company.

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Outlook for 3D printing

The outlook for the 3D printing industry looks positive. The business combination with SPFR values Velo3D at a proforma EV of $1.6 billion. As part of the deal, the company would receive $470 million in cash.

Velo3D expects to post revenues of $545 million in 2025, which would imply a 2025 EV-to-sales multiple of around 3x. The company expects revenues to rise to $936 million by 2026, which would mean a 2026 EV-to-sales multiple of 1.7x.

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Velo3D forecasts sales to rise at a CAGR of 92 percent between 2020 and 2026. In 2026, it expects the EBITDA margins at 34 percent and is forecasting annual recurring revenues to be 38 percent of the total sales that year.

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Velo3D stock forecast

The forecast for Velo3D stock looks positive and the valuations look reasonable considering the high growth that the company is expected to witness. Velo3D expects a high share of recurring revenues in its sales mix. Generally, companies with a high share of recurring revenues attract a valuation premium.

Velo3D is forecasting AM (additive manufacturing) to be a TAM (total addressable market) of $215 billion by 2030. Within that, it expects the TAM for the high-value metal AM market to rise at a CAGR of 30 percent between 2019 and 2030 and reach $35 billion. The company thinks that it will alone serve $20 billion of the market in 2030.

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Is SPFR stock a good buy before the Velo3D merger?

SPFR stock looks like a good buy before the Velo3D merger. The outlook for 3D printing is positive and Velo3D is a good stock to play the robust growth in the industry. The stock is a good long-term investment and could deliver strong returns over the long term. Incidentally, SpaceX, which is among Elon Musk’s privately-held companies, is also an investor in Velo3D.


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