4 LIDAR Stocks to Benefit From Self-Driving Car Revolution

Gone are the days when driverless vehicles were confined to the realms of science fiction. Thanks to persistent innovation and technology breakthroughs, robots are finally taking over the wheels. Over the past few years, autonomous vehicles (AVs) have been hogging the limelight, with auto and tech giants betting big on futuristic robotic vehicles. (Read more: Driverless Race Accelerates: Who is Leading the Game?)

LIDAR Lighting Up AV Prospects

With driverless technology being one of the hottest investment ideas in the auto market, the best way to tap the AV revolution would be to invest in the core technology that has made self-driving cars a reality. And that foundational technology is none other than LIDAR — which basically stands for light detection and ranging.

LIDAR involves 3D scanning technology and makes use of laser beams to detect objects, thereby providing accurate measures of spatial locations based on the time taken by every laser pulse to reflect back to sensors. Self-driving vehicles are to be outfitted with these laser light perception sensors called LIDAR, which renders precise images of the environment around the cars and responds to the surroundings with human-like abilities. Basically, it is this LIDAR technology — which helps offer vehicles with a three-dimensional view of the road — that forms the cusp of the utopian concept of AVs to eventually become a disruptive reality.  

The race to AV supremacy will only get fiercer in the coming years. Enhanced neural networking capabilities and advancements in digital mapping and obstacle-recognition functionalities are expected to lead to safer navigation, reduction in accidents, as well as commuter comfort. Increasing levels of automation is expected to drive the LIDAR market prospects. Per ReportLinker data, the global market for LIDAR is expected to witness a CAGR of 22.5% over the 2021-2028 time frame. Amid the upbeat scenario, we will highlight five LIDAR stocks that you should keep your eyes on. But before that, let’s take a look at the LIDAR manufacturers that went public or announced their IPO plans in 2020 to cash in on the AV revolution.

It’s Raining SPAC IPOs for LIDAR Stocks

The most recent LIDAR developer to announce IPO plans is the U.S. startup Ouster, which will go public by merging with a special purpose acquisition company (SPAC), Colonnade Acquisition Corp CLA. The deal values the maker of lidar sensors for driverless cars and smart cities at $1.9 billion. Ouster, which aims to generate about $19 million revenues in 2020, is notably the fifth LIDAR stock to take the SPAC IPO route this year following the footsteps of Velodyne Lidar Inc. VLDR, Luminar Technologies, Inc. LAZR, Innoviz Technologies and Aeva.

Around 10 days back, Israel-based LIDAR startup Innoviz announced plans to go public by merging with a SPAC called Collective Growth Corporation. Post the merger, which is expected to close in first-quarter 2021, the combined entity will be listed on NASDAQ under the ticker symbol ‘INVZ’. Innoviz’s top-tier strategic partners and clients include Magna International, BMW AG and Aptiv PLC.

California-based LIDAR firm Aeva will be merging with InterPrivate Acquisition Corp. in a deal valued at $2.1billion. The merger is set to close in first-quarter 2021, post which Aeva will be listed in NYSE under the ticker symbol ‘AEVA’. Backed by Porsche SE, Aeva has signed a sensor-system deal with Volkswagen VWAGY and announced a partnership with German-based auto firm ZF Friedrichshafen AG for the supply of 4D LIDAR, based on the frequency-modulated continuous wave technology.

California-based Velodyne began trading on NASDAQ from Sep 30, 2020, after completing its SPAC merger with Graf Industrial Corporation. Early this month, Luminar made NASDAQ debut, following a reverse merger with Gores Metropoulos Inc.

The race to the LIDAR market is gaining traction, with companies vying to supply automakers with the key sensor that would help them notch up their driverless game. Below mentioned are four stocks that are poised to emerge as winners from this AV technology.

Our Choices

Luminar: Since its market debut on Dec 3, the stock has gained more than 107%. Luminar’s proprietary software designed to unlock full lidar capabilities will enhance automakers’ ability to deliver high-speed highway autonomy in commercial series production scale. The company has landed huge contracts with Daimler AG DDAIF, Intel Corp.’s INTC Mobileye unit, Volvo Group and others, which are likely to solidify its standing in the LIDAR market. Volvo’s vehicles will be equipped with Luminar’s Iris lidar sensors beginning 2022. The company expects to generate revenues of 15 million in 2020, which is expected to jump to $837 million by 2025. The Zacks Consensus Estimate for sales for the next year points to year-over-year growth of 69.3%. Luminar currently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Velodyne: Since its IPO on Sep 30, the stock has risen 46%. The Zacks Rank #3 firm is currently leading the LIDAR market on the back of its first-mover advantage, broad product portfolio, and around 300 customers including major auto and tech companies. In October, it announced a three-year sales agreement with Baidu for its Alpha Prime™ lidar sensors. A couple of days back, Velodyne inked a multi-year sales agreement with Motional, which has been at the forefront of driverless innovation for decades. As of Sep 30, Velodyne shipped more than 47,500 units. Per the company’s latest presentation, around 175 projects across different industries can potentially lead to shipments of around 9 million units by 2025. At the end of third-quarter 2020, the leading LIDAR provider’s revenues rose 137% year over year. Full-year 2020 sales are estimated to be $101 million.

ON Semiconductor ON: ON Semiconductor offers various intelligent sensing solutions for automotive and autonomous perception with superior technology targeting image sensors, radar, as well as LIDAR. Well positioned to benefit from the solid momentum witnessed in image sensors amid consistent growth in the advanced driver-assistance systems (“ADAS”) domain, ON Semiconductor currently carries a Zacks Rank #3. The SiPM dToF LIDAR platform developed by ON Semi offers a comprehensive solution for affordable, single point LIDAR for industrial range finding. New product launches by the firm including image sensors for ADAS in the automotive end market for next-generation automobile designs augur well for the top line. The firm’s collaboration with Korea-based LIDAR startup SOS LAB to accelerate the development of LIDAR technology in the automotive market is also likely to boost its prospects. The company has an expected EPS growth rate of 5.3% over the next three-five years.

Veoneer, Inc. VNE: Partnership with Velodyne has bolstered Veoneer’s footing in the LIDAR market. Sweden-based Veoneer is manufacturing and commercializing LIDAR systems for automotive usage, utilizing Velodyne’s scalable auto-grade LIDAR sensor and core 3D software technology.Veoneer has a proven track record of combining superior sensor technology into automotive modules that automakers can effectively integrate into their cars. Veoneer is also working in-house on short-range lidar. Its collaboration with U.S. tech giant Qualcomm bodes well. Veoneer — which currently carries a Zacks Rank #3 — is on track to achieve its first organic sales growth in the fourth quarter of 2020, after it spun off from Autoliv in 2018. The Zacks Consensus Estimate for 2021 earnings and sales signals year-over-year growth of 42.6% and 23.6%, respectively.

Zacks Top 10 Stocks for 2021

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Intel Corporation (INTC) : Free Stock Analysis Report
 
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