Lidar stands for “light radar.” It emits lasers and measure distance by determining how quickly the lasers come back to their origin after hitting objects. According to Wired, “Because lidar sees in much greater detail than radar, it could make … cars capable enough to drive without that constant supervision.” That probably explains why lidar is now considered an essential component of autonomous vehicles and lidar stocks are getting attention.
And with many automakers, including Ford (NYSE:F), GM (NYSE:GM), BMW (OTC:BMWYY), and Honda (NYSE:HMC), intensively looking to roll out autonomous and semiautonomous vehicles, lidar is becoming increasingly lucrative. Moreover, noting that major auto equipment makers Bosch and Valeo (OTC:VLEEY) started to develop lidar, arsTechnica recently proclaimed, “Lidar sensors are about to become a mainstream car feature.”
Research firm Lucintel said lidar is “used in blind spot detection, adaptive cruise control, parking assistance, and pedestrian detection systems.” It predicted revenue of the “automotive detection and ranging sensors market” will have a compound annual growth rate of 17% between 2019 and 2025. Within the sector, the popularity of lidar is expanding more quickly than average, the firm stated.
These lidar stocks are exceptionally well-positioned for this trend:
Collective Growth Corp. (CGRO)
Collective Growth Corp. is a special purpose acquisition company that plans to merge with Israel’s Innoviz Technologies, which develops lidar sensors. Among the start-up’s investors are two huge auto equipment companies, Magna (NYSE:MGA) and Aptiv (NYSE:APTV). Another investor is Softbank (OTC:SFTBY), a huge Japanese investment bank.
Innoviz agreed to sell its lidar to BMW for use in its 2021 SUV. Importantly, Innoviz recently announced that it released a cheaper lidar system more feasible for “mass market” automobiles. Indeed, the company “claims its technology is some of the most cost effective for automakers on the market,” according to Yahoo Finance.
In 2025, Innoviz predicts gross margin will reach 52%, with its operating margin hitting 31%. The valuation of CGRO stock is expected to be $1.4 billion after the merger. This will make Innoviz one of the cheaper lidar plays.
The combination of a top-notch customer, huge investors, affordable products and a relatively low valuation make Collective Growth/Innoviz one of the best lidar stocks to buy.
French auto-equipment company Valeo is reportedly “the only company in the automotive world” that’s mass-producing lidar sensors. Valeo intends to produce 1 billion sensors for automobiles over the next five years. Further, “four of the world’s leading automakers have already signed commercial contracts for it and Valeo’s order book currently stands at close to half a billion euros.”
Like Innoviz, Valeo says it developed relatively affordable lidar. Meanwhile, citing increased auto demand, Moody’s recently predicted that European parts makers will report 11%-12% top-line growth next year. Their EBITDA margin will come in at 6.2%, versus 6.9% in 2019. And the firm identified Valeo as a key beneficiary of the proliferation of electric vehicles on the continent.
Valeo is trading with an affordable forward price-earnings ratio of just over 20 and a tiny price-sales ratio of 0.39. This is on the list of lidar stocks as it seems to be a good growth-at-a-reasonable-price (GARP) name.
Velodyne Lidar (VLDR)
As I noted in a recent column, Velodyne recently announced that it would unveil a new lidar sensor called H800 that it will look to sell for $500. As a result, I said “the H800 will certainly be inexpensive enough to add to all higher-end automobiles and most middle-range ones.” And Highways Today praised the H800 for its “outstanding detection” capabilities.
Moreover, Ford’s European commercial-vehicle unit said that it will use the H800.
Velodyne expects a top line this year of $100 million. Further, “Velodyne has close, advanced partnerships with Ford, China’s Baidu (NASDAQ:BIDU) and Hyundai Mobis.”
In addition, VLDR stock is less risky than undiversified automobile lidar makers. Velodyne is developing sensors for autonomous robots. In fact, Velabit, its 3D lidar sensor for robots, recently “was named the winner of the 2020 Innovation Award by Silicon Valley Robotics.” It has a range of 100 meters, costs only $100, and can be incorporated into drones and vehicles.
The company is trading with a market capitalization of $3.4 billion. VLDR stock is relative cheap for the company that’s arguably the first-mover in the fast-growing lidar space.
On the date of publication, Larry Ramer held a long position in Velodyne.
Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.