With the objective of providing a high-resolution 3D view of their environment, LiDAR (light detection and ranging) sensors are set to be a mainstay in autonomous vehicles.
While not all have been proponents of the technology – Elon Musk, for one, has stated in the past that he is not a fan – J.P. Morgan analyst Samik Chatterjee says the “debate around value-add of a LiDAR in a sensing suite has been long settled.”
The decision to forgo the use of lidar more revolves around costs rather than performance although the jury is still out on the “winning technology approach.”
That said, as far as Chatterjee is concerned, the answer is pretty clear.
“We believe the true differentiation remains in a high performance forward facing LiDAR capable of handling both L2 ADAS as well as L3+ highway autonomy allowing automakers to prioritize safety with ADAS while selling a premium option in L3 highway driving,” the analyst opined.
Against this backdrop, Chatterjee has picked up this thread, and followed it to the logical conclusion: pulling the trigger on LiDAR stocks that he sees as winners going forward. In fact, the analyst sees a particular pair of stocks delivering gains of more than 200% in the year ahead.
And turns out he’s not alone; using the TipRanks database, we can see that both are rated as Strong Buys by the analyst consensus. Let's take a closer look.
Luminar Technologies (LAZR)
We’ll start with Luminar, one of the first lidar companies to go public back in December 2020, following a SPAC merger with Gores Metropoulos. The company has established itself as a leader in this nascent space with a focus on bringing to market mass-produced automotive-grade products without breaking the bank. The tech is designed with a wide remit in mind, suitable for both passenger vehicles and commercial trucks.
The company has been pivoting away from its legacy Hydra system to the more capable Iris and the auto industry has obviously been impressed. Luminar has already struck deals with various OEMs including such luminaries as Nissan, Volvo and Mercedes.
The interest from the industry has been reflected in an expanding top-line, as was on offer in the latest set of quarterly results for 2Q22. Revenue reached $10 million, amounting to a 57% increase on the same period last year and outpacing the street’s forecast of $8.52 million. There wasn’t quite as much success on the bottom-line, with EPS of -$0.27 falling short of the -$0.24 expected by the analysts.
However, the company raised its full-year 2022 revenue outlook from $40 million to between $40 million to $45 million. Consensus was looking for $41.35 million.
J.P. Morgan’s Chatterjee thinks there’s plenty of more growth in the cards, believing the company is positioned “not only as an industry leader in relation to LiDAR technology, but also more broadly in relation to autonomous driving technology.”
“We forecast Luminar to end the decade with the highest revenue amongst the peer group and the company to have multiple levers to match consensus and implicit target of $4.5 bn and $5 bn, respectively, in 2030,” Chatterjee elaborated. “Luminar has the greatest number of wins for a standalone LiDAR company, including with both traditional and non-traditional OEMs, and also has revenue prospects around software with investments in software stack with Zenseact, driving revenue opportunities for the company to be much larger relative to peers that are focused on hardware differentiation alone.”
To this end, Chatterjee thinks LAZR has some way to go, and by some way, we mean 282% of upside. Those are the returns investors are looking at, should the stock make it all the way to Chatterjee's Street-high $30 price target. No need to add, the analyst’s rating is an Overweight (i.e. Buy). (To watch Chatterjee’s track record, click here)
Overall, with 9 recent analyst reviews on record, including 7 Buys and 2 Holds, LAZR has earned its Strong Buy analyst consensus rating. The shares are selling for $7.86 and their $16.78 average price target implies ~113% upside for the next 12 months. (See Luminar stock forecast on TipRanks)
Innoviz Technologies (INVZ)
The next JPMorgan pick we're looking at is Innoviz Technologies. The company currently has two LiDAR hardware systems available, the first generation InnovizOne and the second generation InnovizTwo. These products have been tested and used in a range of driving applications and conditions, including robotaxis, sidewalk deliver tech, industrial drones, and consumer vehicles, as well as heavy trucks, industrial equipment, and commercial drones. Both systems are compatible with Level 3-5 autonomous vehicles. Innoviz’ LiDAR systems can be complemented by the company’s Perceptions software package.
The company’s next main product, the ‘next generation’ Innoviz360, is under final development for both automotive and non-automotive applications. It is scheduled for marketing in Q4 of this year.
For companies trying to make inroads in a new segment, getting industry big wigs on board is vital. This is something that Innoviz already appears adept at. Innoviz was the first company to nab an L3 LiDAR design win with BMW and that has been followed up recently with the news that Volkswagen subsidiary CARIAD has chosen the company to be its LiDAR sensor and software supplier for all AVs under the Volkswagen brand. This is a big catch and one that boosted the forward-looking order book from $2.6 billion to $6.6 billion.
However, it’s still early days for this company on the revenue front, with the top-line showing just $1.79 million in 2Q22. Yet, that amounted to a 77.2% year-over-year increase.
Although Chatterjee thinks the company has only a “narrow portfolio” of hardware products, he highlights the fact Innoviz is setting up the “largest order book in pure play public LiDAR companies at this time.”
“Additionally,” the analyst went on to say, “outside of the expansion opportunities with Volkswagen with more brands and more vehicle models signing up to leverage the platform being set up by CARIAD, we also expect the pace of wins with existing and potentially new customers to accelerate following the validation by two major auto OEMs. We expect the combination of numerous wins, large volumes, a balance of LiDAR costs and performance and ability to support highway autonomy at high speeds will position Innoviz to ramp revenues well into the end of the decade, while cost discipline should drive profitability.”
As such, Chatterjee slaps an Overweight (i.e. Buy) rating on Innoviz shares along with a $22 price target. Should that figure be met, investors will be sitting on enormous returns of 316% a year from now.
Do other analysts agree with Chatterjee? As it turns out, they do. With 100% Street support, or 4 Buy ratings to be exact, the message is clear: INVZ is a Strong Buy. At $8.67, the average price target puts the upside potential at ~64%. (See Innoviz stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.