Every so often, some technological advance comes along that forever alters the world we live in. Henry Ford’s assembly line brought cars 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 of those areas, the automotive, computing, and networking sectors, are coming together now, and will bring enormous change to the inner workings of our cars.
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One of those coming changes is already starting to appear. LiDAR technology – light detection and ranging – is a sensor technology, offering improvements in vehicle safety and navigation systems, by way of driver assistance, and bring the needed sensitivity to make autonomous vehicles possible.
Last year, the global auto industry demand for LiDAR reached $555 million; that’s expected to grow to more than $8.6 billion by end of this decade, for a compound annual growth rate of 40% or higher. Few industries offer that kind of growth potential, and investors should take note.
Against this backdrop, JPMorgan’s 5-star analyst Samik Chatterjee has taken an in-depth look at the LiDAR market, and has tapped two stocks as potential winners in this expanding field. They both offer investors a low cost of entry, under $10 per share, and according to Chatterjee, they boast triple-digit upside potential.
Running the tickers through the TipRanks database, it’s clear Chatterjee is not alone in thinking these stocks have plenty to offer investors; both are also rated as 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 several LiDAR packages, and its flagship products, InnovizOne and InnovizTwo, are specifically designed for automotive use. Innoviz was selected by BMW to partner in the mass production of Level 3-5 autonomous vehicles, giving it a major outlet for its LiDAR sensor systems.
While Innoviz’ deal with BMW gives it an opening with a premier auto maker, the company has not 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 facility during 3Q22. That move caused a run of downtime in the production lines, and a consequent drop in revenue for the quarter. In the 3Q22 report, the last quarterly results released, the company had a top line of just $0.88 million, falling significantly from the $2.1 million recorded in 3Q21 and missing the consensus forecast of $2.22 million. The company expects to see revenues normalize in Q4, for which results are expected in early March.
On a positive note for the company, Innoviz reported having $218 million in cash holdings at the end of Q3, pockets deep enough to get it through a rough spot.
Covering Innoviz for J.P. Morgan, Chatterjee sees plenty of potential for investors to grab onto. He writes, “The company is following up early wins in automotive (BMW) and a shuttle program with big volumes win (with VW) and a non-traditional auto OEM (Asia OEM and EV), setting it up for the largest order book in pure-play public LiDAR companies at this time.”
“Additionally, we also expect the pace of wins with existing and potentially new customer engagements to accelerate following the validation with two major auto OEMs. We expect the combination of numerous wins, large volume wins, balance of LiDAR costs and performance and ability to support highway autonomy at high speeds to position Innoviz to ramp revenues well through the end-of-the-decade, while cost discipline should drive profitability,” the analyst added.
Acknowledging the company’s potential growth, Chatterjee rates INVZ shares an Overweight (i.e. Buy), and his $13 price target suggests a robust one-year upside of ~154%. (To watch Chatterjee’s track record, click here)
Overall, Wall Street’s analysts have published 4 recent reviews on Innoviz stock, which include 4 Buys and 1 Hold for a Strong Buy consensus rating. The stock’s current share price is $5.12, and its $11 average price target indicates a gain of ~115% lying ahead for this innovative company. (See Innoviz stock forecast)
Luminar Technologies, Inc. (LAZR)
The second stock we’ll look at, Luminar Technologies, is a Florida-based firm that also maintains a major presence in Silicon Valley. The company is developing cutting-edge LiDAR and machine perception technology, mainly 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 major products in production, Iris and Sentinel. Both are built from the chips up, and designed to integrate LiDAR vision sensors into new vehicles from the early stages of assembly. The company’s products can scale to small compact cars or to commercial trucks. Luminar currently works with multiple global commercial partners, including a majority of OEMs in the automotive sector, for both consumer and commercial vehicles.
This is a tech segment that is still ramping up, and Luminar’s revenues are correspondingly modest. Long-term, however, the company has been showing a trend toward an increasing top line. The last reported quarter was 3Q22, when Luminar brought in $12.8 million in revenue, compared to $8 million in the prior-year quarter. The company maintained its full-year revenue guidance of $40 to $45 million; it will report Q4 and full year 2022 results in March, so we’ll see then how it measures up to that outlook.
In the meantime, JPM’s Chatterjee is impressed with this company. Setting out why he sees LAZR stock growing going forward, 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 using custom engineered and manufactured components; 2) software investments which will enable Luminar to participate in the large addressable market relative to the software stack for autonomous vehicles.”
Based on the above, it’s no wonder Chatterjee rates LAZR shares an Overweight (i.e. Buy). With a price tag of $15, the analyst believes shares could surge 136% in the next twelve months.
Chatterjee’s bullish view is one of 8 recent analyst reviews on this stock – including among them 6 Buys and 2 Holds to support a Strong Buy consensus. The shares are trading for $6.35 and have an average price target of $14.13, giving LAZR a 122% one-year upside potential. (See Luminar stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured 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.
