Ouster Inc (OUST) Daily Chart Analysis: Potential Double Bottom Formation Amid Improving Fundamentals
TLDR: Investment Thesis
Ouster Inc (OUST) presents a mixed technical picture with bearish momentum but potential reversal signals, while fundamentals show improving growth trajectory despite continued losses. Consider:
- Bullish Entry: $9.00 with target at $12.00, stop-loss at $8.00 (1:3 risk-reward)
- Bearish Entry: $9.00 with target at $7.00, stop-loss at $10.00 (2:1 risk-reward)
- Key Catalyst: Q1 2025 earnings (March 31) expected to show 49.6% EPS improvement and 19% revenue growth
Technical Analysis
Chart Specifications
Daily chart as of March 27, featuring SMA 20-period (red), SMA 50-period (blue), and SMA 200-period (yellow) indicators.
Current Market Structure
OUST is currently in a bearish trend since its July 2024 peak, with recent consolidation around $9.00. The price is trading below both the 20-day and 50-day SMAs, confirming short-term bearish momentum. The bearish crossover of the 20-day SMA below the 50-day SMA further reinforces this negative bias.
Key support levels have established at $6.50 (recent low) and $8.00, while resistance is found at $10.00 and $12.00 (previous high from early 2025). The price remains above the 200-day SMA, suggesting the longer-term structure hasn't completely deteriorated.
Chart Patterns and Implications
A potential double bottom formation is developing near the $6.50 level, which could signal a bullish reversal if confirmed with a break above $10.00. Recent price action shows consolidation in the $8.00-$10.00 range, with a bullish engulfing pattern near $9.00 suggesting potential short-term upside.
Volume Analysis
Trading volume has been relatively low during the recent consolidation phase, indicating a lack of strong conviction. However, notable volume spikes occurred at key reversal points ($6.50 and $12.00), suggesting these levels have significance. An increase in volume on a breakout from the current range would provide confirmation of the next directional move.
Fundamental Analysis
Financial Health Assessment
Ouster maintains a relatively strong balance sheet with $172 million in cash ($3.44 per share), providing significant runway despite ongoing losses. The company's quick ratio of 2.42 and current ratio of 2.80 indicate solid short-term liquidity. However, the debt-to-equity ratio of 11.19% shows some leverage, though manageable given the cash position.
The company's profitability metrics remain challenging with negative margins across the board:
- Gross margin: 36.42% (positive)
- EBITDA margin: -84.92%
- Operating margin: -85.07%
- Profit margin: -87.35%
Growth Trajectory
Ouster's revenue growth story shows promise:
- Recent revenue growth: 23.1% year-over-year
- Q1 2025 revenue projection: $30.87 million (+19.0% YoY)
- Q2 2025 revenue projection: $33.57 million (+24.4% YoY)
- FY 2025 revenue projection: $143.88 million (+29.5% YoY)
- FY 2026 revenue projection: $200.43 million (+39.3% YoY)
The company is also showing improvement in EPS trajectory:
- Q1 2025 EPS estimate: -$0.26 (49.6% improvement YoY)
- Q2 2025 EPS estimate: -$0.24 (51.7% improvement YoY)
- FY 2025 EPS estimate: -$0.84 (53.9% improvement YoY)
- FY 2026 EPS estimate: -$0.62 (26.2% improvement YoY)
Analyst Sentiment
Analyst sentiment is notably bullish:
- Mean recommendation: 1.33 (Strong Buy)
- 5 analysts covering the stock
- Mean price target: $13.80 (+38.3% from current price)
- Target range: $11.00 to $17.00
Recent EPS revisions have been mixed but generally positive, with 2 upward revisions in the last 7 days for the current quarter, though there have been some downward revisions for future periods.
Trade Scenarios
Bullish Case
- Entry Point: $9.00 on a pullback with increasing volume
- Target Price: $12.00 (previous resistance)
- Stop-Loss: $8.00 (below recent support)
- Risk-to-Reward: 1:3
- Timeframe: 1-2 months
- Catalyst: Confirmation of double bottom pattern, positive Q1 earnings surprise
- Confirmation Signals: Break above $10.00 with above-average volume, 20-day SMA crossing above 50-day SMA
Bearish Case
- Entry Point: $9.00 on a failed rally attempt
- Target Price: $7.00 (midpoint between recent low and support)
- Stop-Loss: $10.00 (above recent resistance)
- Risk-to-Reward: 2:1
- Timeframe: 1 month
- Catalyst: Earnings disappointment, break below 200-day SMA
- Confirmation Signals: Rejection at $10.00 resistance, increasing volume on downside moves
Risk Factors
Technical Warning Signals
- Failure of the double bottom pattern if price breaks below $6.50
- Continued bearish momentum with 20-day SMA below 50-day SMA
- Low volume on upside moves suggesting lack of conviction
- Price approaching the 200-day SMA, which if broken could accelerate selling
Fundamental Concerns
- Persistent negative earnings despite improvement trajectory
- Recent earnings history shows consistent negative surprises (last three quarters)
- Negative operating cash flow of -$33.69 million
- High negative margins across operations
- Competitive pressures in the LiDAR and sensor market
- Potential for dilution given ongoing cash burn
Conclusion: Balancing Technical Signals with Improving Fundamentals
Ouster presents a complex investment case with contradicting signals. Technically, the stock remains in a bearish trend with prices below key short-term moving averages, but the potential double bottom formation suggests a possible reversal. The upcoming Q1 earnings report (March 31) will likely be a pivotal catalyst.
From a fundamental perspective, Ouster shows impressive revenue growth projections and improving EPS trajectory, supported by strong analyst sentiment (Strong Buy consensus). However, persistent negative earnings and cash flow remain concerns, though the strong cash position ($3.44 per share) provides significant runway.
Recommended Positioning Strategy
For risk-tolerant investors, a small position with the bullish scenario parameters offers an attractive risk-reward setup, particularly given the strong analyst consensus and improving fundamentals. More conservative investors should wait for confirmation of the reversal with a break above $10.00 on strong volume or positive earnings surprise before establishing positions.
For existing shareholders, maintaining positions with a stop-loss at $8.00 is prudent, with potential to add on confirmation of the bullish scenario.
Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. The author does not hold positions in OUST. All investments involve risk, and past performance does not guarantee future results. Readers should conduct their own research and consult with a financial advisor before making investment decisions. This article was written with the help of AI models