Velo3D: Growth Has Returned — Upgrading to Buy on Improving Fundamentals and SpaceX Tailwinds

Hook & thesis

Velo3D has shed the “story stock” label and is showing tangible operational progress: accelerating revenue, improving gross margins, and a management outlook that includes positive EBITDA in the back half of 2026. Add public validation from SpaceX and industry partnerships, and the setup looks ripe to trade the name higher. I am upgrading VELO to Buy and proposing a defined-entry trade that balances upside potential against execution and liquidity risks.

This is a trade idea, not a recommendation to hold forever. The case rests on two simple pillars: improving unit economics driven by stronger demand and the high-value customer pipeline that can convert into machine orders and recurring parts revenue. If management delivers on its $60-70M guidance for FY2026 and margin expansion continues, the current market cap understates the growth runway.

What the company does and why the market should care

Velo3D manufactures metal laser sintering 3D printers and related software - think high-end factory equipment for complex aerospace and industrial parts. Its product family includes the Assure quality system, Flow software, and the Sapphire line of printers (including Sapphire XC). The business model combines capital equipment sales with higher-margin consumables and services, which is the crucial lever for margin expansion.

The market cares because Velo3D addresses constrained supply chains and the rising demand for complex, lightweight, high-performance parts in aerospace, defense and industrial applications. Getting machine placements at scale with customers like SpaceX is a direct path to recurring parts revenue and higher gross margins.

The fundamental drivers — what’s changed

• Revenue momentum: Q1 2026 top line was $13.8M, up 48% year-over-year.
• Margin expansion: Gross margin improved to 17.2% from 7.5% a year earlier.
• Guidance and profitability path: Management reaffirmed FY2026 revenue guidance of $60-70M and expects EBITDA to turn positive in H2 2026.
• Customer validation: Public confirmation that SpaceX is producing Raptor engine parts using Velo3D technology and discussions for additional orders after initial deployments (news 06/16/2026).
• Balance sheet actions: The company completed a $50M equity offering and reduced debt by ~70% to strengthen liquidity and extend runway.

Support from the numbers

The market snapshot values Velo3D at roughly $656M market cap with an enterprise value near $402M. On that EV base the implied EV/sales multiple sits near 7.0x today, using management’s growth cadence. The company remains unprofitable on an EPS basis (reported EPS -$1.58 trailing), but free cash flow is improving from a larger cash burn earlier (recent free cash flow was negative $58.7M). Current cash on the balance sheet is modest relative to runway needs (reported cash ~$3.7M), which explains the prior equity raise and the emphasis on turning EBITDA positive.

Technically, the chart has improved: price is above the 10- and 20-day SMAs (10-day ~ $13.24, 20-day ~ $11.62), with an RSI near 58 and a bullish MACD histogram indicating positive momentum. Average daily volume has risen to around 2.25M which gives reasonable intraday liquidity for a trade of modest size.

Valuation framing

At a market capitalization of ~$656M and implied EV of ~$402M, Velo3D is priced like a high-growth capital-equipment company that still needs to prove durable margins. EV/sales ~7x looks rich if you assume Velo3D stalls around mid-single-digit growth; it looks reasonable if revenue approaches upper guidance and margins continue expanding toward mid-teens-plus. The math is straightforward: if revenue reaches $65M and gross margin climbs further while SG&A moderates, the path to positive EBITDA in H2 2026 is plausible and would justify a higher multiple.

Compared with legacy industrial machinery peers you would expect lower multiples, but Velo3D isn't a pure industrial name anymore - it's a growth tech-enabled supplier to premium aerospace customers. The valuation thus sits somewhere between industrial capex-equipment multiples and growth software-like premiums for mission-critical hardware-plus-software vendors. That hybrid explains both the premium EV/sales and the volatility.

Key catalysts

• SpaceX adoption: Any confirmation of incremental machine orders or long-term supply agreements from SpaceX would be a major re-rating catalyst (recent positive comments 06/16/2026 drove outsized moves).
• Quarterly cadence: Delivering revenue near the midpoint or top of $60-70M FY2026 guide and hitting margin targets will validate the story.
• Defense and industrial contracts: Upside from the $9.8M defense contract and additional partnerships (e.g., Aurelia) converting to recurring parts and service revenue.
• Operational leverage: Continued improvement in gross margin and a demonstrable path to sustained positive EBITDA in H2 2026.
• Share structure and liquidity events: Any follow-on equity or strategic investment that reduces dilution or brings strategic partners would be positive if it funds growth without heavy dilution.

Trade plan (actionable)

My trade disposition is bullish: Trade direction: long. Proposed execution:

• Entry price: $15.57 (current market level).
• Target price: $28.00.
• Stop loss: $12.00.
• Time horizon: long term (180 trading days) — I expect the primary catalysts (quarterly results and potential follow-on order announcements) to unfold over multiple quarters, and I want room for margin improvement to be reflected in the multiple. For traders who want shorter exposure, consider scaling out near $20 across a mid term (45 trading days) plan or tightening stops if trading shorter: short term (10 trading days) traders should use smaller position sizes and stricter stops to manage news-driven volatility.

Position sizing: keep this a meaningful but controlled allocation given ongoing execution risk and the residual cash runway question. If you are a momentum trader, a smaller, shorter-duration position is appropriate; if you are conviction-oriented and can tolerate swings, hold toward the long-term target while monitoring quarterly results.

Risks and counterarguments

• Liquidity & dilution risk: The company completed a $50M equity offering that pressured the stock earlier, and future funding needs could lead to additional dilution if cash flow recovery lags expectations.
• Execution risk on margins: While gross margins have improved to 17.2%, sustaining and expanding margins depends on consistent machine orders plus parts and services growth. If demand softens or unit economics don’t scale, EBITDA guidance could be missed.
• Customer concentration: A meaningful portion of the narrative (and upside) is tied to SpaceX and a handful of large aerospace customers. If those relationships do not scale into repeat orders, the revenue lumpiness could produce outsized stock moves downward.
• Valuation vulnerability: At EV/sales near ~7x the stock is vulnerable to multiple compression if the market doubts the sustainability of revenue and margin acceleration — particularly in a risk-off environment for growth-capital-equipment names.
• Macro & capex cyclical risk: Demand for capital equipment can be cyclical; a pullback in aerospace or defense spending or broader industrial capex weakness could delay orders and lengthen conversion timelines.

Counterargument: Critics will point out that trailing EPS is deeply negative (EPS -$1.58) and free cash flow remains negative, which historically warrants a lower valuation. If management fails to convert pipeline interest into firm machine orders or if the SpaceX story loses luster, the valuation premium will evaporate quickly and the stock could revisit recent lows. That is why the stop at $12 is critical and position sizing must be conservative.

What would change my mind

I will reassess the Buy stance if one of the following occurs: (1) management materially lowers FY2026 guidance or pushes expected positive EBITDA into 2027, (2) a major customer publicly reduces its plans or an expected large order falls through, or (3) cash burn accelerates and the company announces a dilutive financing that meaningfully increases share count without commensurate growth. Conversely, sustained order flow from SpaceX or other anchor customers and sequential margin improvements would reinforce the bullish case and could lead me to add to the position or raise the target.

Conclusion

Velo3D has moved from promise to proof in small but meaningful steps: accelerating revenue, improving gross margin, and external validation from marquee customers. Those data points justify upgrading to Buy for a long-term trade with disciplined risk management. Use the proposed entry at $15.57, a stop at $12.00, and a target of $28.00 over a long-term (180 trading days) horizon while watching quarterly execution and customer order flow closely.

Trade idea recap: Upgrade to Buy. Entry $15.57, Stop $12.00, Target $28.00. Long-term horizon (180 trading days). Manage position size; watch quarterly results and SpaceX/order flow closely.