Every once in a while, some technological breakthrough appears that forever alters the world we live in. Henry Ford’s assembly line brought automobiles to the masses, the Internet has changed the way we communicate, and mobile devices have taken those changes to a new level. Improvements in all three areas, the automotive, IT and networking sectors, are coming together now and will bring a huge change to the inner workings of our cars.
One of those coming changes is already beginning to appear. LiDAR (light sensing and ranging) technology is a sensor technology that offers improvements in vehicle safety and navigation systems, through driver assistance, and provides the sensitivity necessary to make autonomous vehicles possible.
Last year, global demand for LiDAR from the automotive industry reached $555 million; it is expected to grow to more than $8.6 billion by the end of this decade, for a compound annual growth rate of 40% or more. Few industries offer that kind of growth potential, and investors should take note.
Against this backdrop, JPMorgan 5-Star Analyst Samik Chatterjee took an in-depth look at the LiDAR market and selected two stocks as likely winners in this expanding field. Both offer investors a low cost of entry, less than $10 per share, and according to Chatterjee, have triple-digit upside potential.
Reviewing the tickers through the TipRanks database, it’s clear that Chatterjee isn’t the only one who thinks these stocks have a lot to offer investors; both are also rated Strong Buys by the analyst consensus.
Innoviz Technologies Ltd. (INVZ)
We’ll start with Innoviz, a leader in the design and manufacture of high-end solid-state LiDAR sensors, and the perception software needed to make sense of what the sensor ‘sees’. Innoviz offers various LiDAR packages and its flagship products, InnovizOne and InnovizTwo, are designed specifically for automotive use. Innoviz was selected by BMW to partner in the mass production of Tier 3-5 autonomous vehicles, giving it an important outlet for its LiDAR sensor systems.
While Innoviz’s deal with BMW gives it a shot at a top-tier automaker, the company hasn’t stopped looking for outlets and partnerships. Earlier this month, Innoviz announced two such deals. One, with Swiss-based LOXO, is for the provision of LiDAR sensors to enable autonomous driving in a fleet of all-electric delivery vehicles. The other, with the French company Exwayz, is to integrate the InnovizOne LiDAR system into a variety of non-automotive applications.
Innoviz is expanding, and to accommodate its growth, the company moved to a new headquarters during 3Q22. That move led to a streak of downtime on production lines and a consequent drop in revenue for the quarter. In the 3Q22 report, the latest quarterly results released, the company had an upper line of just $0.88 million, a significant drop from the $2.1 million posted in 3Q21 and missed the consensus forecast of $2. ,22 million. The company expects revenue to normalize in the fourth quarter, with results expected in early March.
On a positive note for the company, Innoviz reported that it had $218 million in cash at the end of the third quarter, pockets deep enough to see it through a tough time.
Covering Innoviz for JP Morgan, Chatterjee sees a lot of potential for investors to latch on to. He writes: “The company is pursuing early earnings in an automotive (BMW) and transportation program with high volumes won (with VW) and a non-traditional car OEM (Asia OEM and EV), preparing it for the order book. largest in pure public LiDAR companies at the moment.”
“In addition, we also expect the pace of wins with existing and potentially new customer engagements to accelerate after validation with two major auto OEMs. We expect the combination of numerous wins, high volume gains, balancing LiDAR performance and cost, and the ability to support highway autonomy at high speeds will position Innoviz for revenue growth through the end of the decade, while the cost discipline should drive profitability. ”, added the analyst.
Acknowledging the company’s potential growth, Chatterjee rates INVZ stock an Overweight (ie Buy), and his $13 price target suggests a solid one-year upside of ~154%. (To view Chatterjee’s history, Click here)
Overall, Wall Street analysts have posted 4 recent reviews on Innoviz’s stock, including 4 Buys and 1 Hold for a Strong Buy consensus rating. The current share price is $5.12 and its $11 average price target indicates ~115% gain going forward for this innovative company. (Watch Innoviz Stock Forecast)
Luminar Technologies, Inc. (LAZR)
The second stock we’ll look at, Luminar Technologies, is a Florida-based company that also maintains a significant presence in Silicon Valley. The company is developing state-of-the-art LiDAR and machine perception technology, primarily for use in the automotive sector. Luminar’s product lines are designed to integrate sensors with AI, giving cars autonomous safety features to support a human driver. The systems will also help drivers navigate in dark conditions or on winding roads.
Luminar currently has two main products in production, Iris and Sentinel. Both are built from the chips down and are designed to integrate LiDAR vision sensors into new vehicles from the earliest stages of assembly. The company’s products can scale to small compact cars or commercial trucks. Luminar currently works with multiple global business partners, including most OEMs in the automotive sector, for both consumer and commercial vehicles.
This is a tech segment that’s still growing, and Luminar’s revenue is correspondingly modest. However, over the longer term, the company has shown a trend towards a rising top line. The last reported quarter was 3Q22, when Luminar generated $12.8 million in revenue, compared to $8 million in the prior-year quarter. The company maintained its full-year revenue guidance of $40 million to $45 million; will report fourth-quarter and full-year 2022 results in March, so we’ll see how it fits into that outlook.
Meanwhile, JPM’s Chatterjee is impressed with this venture. Laying out why he sees LAZR stock growing in the future, he writes: “Luminar [is] positioned not only as an industry leader in relation to LiDAR technology, but also more broadly in relation to autonomous driving technology. We see a differentiated position through 2 key aspects including: 1) Performance of the forward facing LiDAR designed with custom designed and manufactured components; 2) investments in software that will allow Luminar to participate in the large addressable market related to the autonomous vehicle software stack.”
Based on the above, it is not surprising that Chatterjee rates LAZR stock as Overweight (ie Buy). With a reference price of $15, the analyst believes that the shares could rise 136% in the next twelve months.
Chatterjee’s bullish view is one of 8 recent analyst reviews for this stock, including 6 Buys and 2 Holds to support a strong Buy consensus. Shares are trading at $6.35 and have an average price target of $14.13, giving LAZR a one-year upside potential of 122%. (Watch Luminar Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the noted analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
