Aiming to provide 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 everyone has been a fan of the technology — Elon Musk, for example, has said in the past that he’s not a fan — JP Morgan analyst Samik Chatterjee says “the debate around the added value of LiDAR in a sensor suite has long been settled.”
The decision to move away from using lidar revolves more around cost than performance, although the jury is still out on the “winning technology approach.”
However, as far as Chatterjee is concerned, the answer is quite clear.
“We believe the real differentiation remains in high-performance forward-facing LiDAR capable of driving both L2 ADAS and L3+ highway autonomy, allowing automakers to prioritize safety with ADAS while selling a premium option in highway driving L3,” the analyst believes.
Against this backdrop, Chatterjee picked up that thread and followed it to its logical conclusion: pulling the trigger on LiDAR stock, which he sees as profitable going forward. In fact, the analyst sees a particular pair of stocks delivering gains of more than 200% over the next year.
And it turns out he’s not alone; using 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 in December 2020, following the SPAC merger with Gores Metropoulos. The company has established itself as a leader in this nascent space with a focus on bringing mass-produced automotive products to market without breaking the bank. The technology is designed with a wide range, suitable for both passenger vehicles and commercial trucks.
The company is moving away from its legacy Hydra system to the more powerful Iris, and the automotive industry has clearly been impressed. Luminar has already struck deals with various OEMs, including such luminaries as Nissan, Volvo and Mercedes.
Industry interest is reflected in an expanding top line, as suggested in the latest set of 2Q22 quarterly results. Revenue hit $10 million, a 57% increase over the same period last year and beating the Street estimate of $8.52 million. There wasn’t as much success on the bottom line, with EPS of -$0.27 coming in short of the -$0.24 analysts were expecting.
However, the company raised its full-year 2022 revenue forecast from $40 million to between $40 million and $45 million. Consensus was seeking $41.35 million.
JP Morgan’s Chatterjee thinks much more growth is on the cards, believing the company is positioned “not only as an industry leader in LiDAR technology, but more broadly in autonomous driving technology.”
“We forecast that Luminar will end the decade with the highest revenue among the peer group, and the company will have multiple levers to achieve consensus and implied targets of $4.5 billion and $5 billion, respectively, in 2030,” Chatterjee said. . “Luminar has the largest number of wins for a stand-alone LiDAR company, including with both traditional and non-traditional OEMs, and also has revenue prospects around software with investments in a software stack with Zenseact, making the revenue opportunities for the company be much larger relative to partners that are focused only on hardware differentiation.”
To that end, Chatterjee thinks LAZR has a ways to go, and by some means we mean 282% growth. That’s the return investors expect if the stock hits Chatterjee’s high of $30. Needless to add, the analyst rating is Overweight (ie Buy). (To watch Chatterjee’s record, Press here)
Overall, with 9 recent analyst reviews recorded, including 7 buys and 2 holds, LAZR has earned its analyst consensus rating of Strong Buy. Shares are trading at $7.86 and their average target price of $16.78 suggests ~113% upside over the next 12 months. (See the Luminar stock forecast at 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 applications and driving conditions, including robotics, curbside delivery, 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’s LiDAR systems can be complemented by the company’s Perceptions software suite.
The company’s next major product, the “next generation” Innoviz360, is in final development for both automotive and non-automotive applications. It is scheduled for release in Q4 of this year.
For companies trying to break into a new segment, the involvement of big wigs in the industry is vital. This is something that Innoviz already seems adept at. Innoviz was the first company to win an L3 LiDAR design with BMW and this was 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. That’s a big catch, and one that has increased the prospective 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. Still, this amounts to a 77.2% year-over-year increase.
While Chatterjee believes the company only has a “narrow portfolio” of hardware products, he highlights the fact that Innoviz is building “the largest order book of pure public LiDAR companies right now.”
“Furthermore,” the analyst said, “outside of expansion opportunities with Volkswagen having more brands and more vehicle models signing up to use the platform created by CARIAD, we also expect the pace of earnings with existing and potential new customers to accelerate following validation by two major automotive OEMs. We expect the combination of multiple wins, high volumes, a balance between LiDAR costs and performance, and the ability to maintain highway autonomy at high speeds will position Innoviz to grow revenue through the end of the decade, while cost discipline should drive profitability.”
As such, Chatterjee places an Overweight (ie, Buy) on Innoviz stock along with a $22 price target. If this figure is achieved, investors will see a whopping return of 316% annually from now.
Do other analysts agree with Chatterjee? As it turns out, they do. With 100% Street support, or more precisely 4 Buy ratings, the message is clear: INVZ is a strong buy. At $8.67, the average price target puts the upside potential at ~64%. (Check out the Innoviz stock forecast at 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.