Friday, February 11, 2022 9:26:19 AM
LiDAR: Review Leading To Buy Innoviz Recommendation
Feb. 10
https://seekingalpha.com/article/4485872-lidar-review-leading-to-buy-innoviz-recommendation
Summary
- The LIDAR market for vehicles is forecast to grow from $1.5 billion to more than $6 billion in the next few years.
- Established companies and new tech start-ups are chasing this market; most car manufacturers buy the technology rather than developing it in-house.
- The race is on to get products to market; choosing the right companies to invest in could lead to significant returns on investment in a relatively short time frame.
In this article, I provide a review of seven smaller companies hoping to sell LiDAR systems, most of them are tech start-ups, and all of them are small with a currently depressed share price.
The purpose of the review is to choose a LiDAR company to buy.
The LiDAR companies reviewed are Velodyne Lidar, Inc. (NASDAQ:VLDR), AEye, Inc. (NASDAQ:LIDR), Innoviz Technologies (NASDAQ:INVZ), Luminar Technologies (NASDAQ:LAZR), MicroVision, Inc. (NASDAQ:MVIS), Ouster, Inc. (NYSE:OUST), Aeva Technologies (NYSE:AEVA).
LiDAR is a reasonably straightforward idea. A laser is directed forward, bounces off an object, then a sensor collects the rebound. The software can then calculate the distance to the object by looking at how long it takes for the laser to get back to the sensor. Although the technology has significant limitations, it doesn't work in bad weather, and intense sunlight and other LiDAR interference are problems. It is becoming an integral part of autonomous vehicle sensing, and many semi-autonomous systems already use it.
A web literature review suggests the market for LiDAR is currently $1.5 billion with a CAGR between 12% and 16%. $7 billion by 2026 appears to be the consensus opinion. There is a wide variety of forecasts, and we must also consider the NODAR view held by Tesla and others. They believe that LiDAR is not needed and cameras alone are sufficient. The falling price of LiDAR and its increased accuracy plus the ongoing investment by significant players suggest that LiDAR is here to stay and that it will become a large market.
My opinion is that LiDAR will be a part of the sensing system used by autonomous and semi-autonomous vehicles along with Radar and Cameras. Manufacturers will likely integrate all three technologies into automobiles to provide improved safety.
The review will consider three points for each candidate company:
1. What technology are they using?
2. What is their route to market? Do they have a sales channel?
3. Company finances, have they got enough cash on hand?
LiDAR Technology
LiDAR companies have three crucial decisions.
What type of laser will they use? How will they direct the laser forward to hit different targets? What sensor technology will they use to collect the information?
Types of Laser
Power and hence range decisions are restricted by the need for the laser to be eye-safe. Most companies use 905nm or 1550nm lasers; the higher power 1550nm can go further and is inherently eye-safe; however, it is a new technology and requires expensive and sometimes toxic material to make and sense it.
905nm is lower power, limiting its range, but it is an older, well-understood technology that does not require exotic production materials. It is not inherently eye-safe, 905nm laser can reach the human retina, which is not true for the 1550nm. There is much debate about the safety of this technology and, at the moment, limited testing information. This article from LaserFocus World: Automotive LiDAR: Safety questions raised about 1550 nm LiDAR explains much of the debate.
Directing the laser at an object
Manufacturers are choosing one of four technologies, the goal is to make a reliable, low-cost sensor that enables AI to accurately interpret what is in front of a car.
Flash: a single wide-angle radar illuminates the entire field of view. Flash has range limitations and some accuracy concerns as every object in view only receives a fraction of the laser.
Spinning: These are the lasers we see on top of autonomous cars; the laser spins through up to 360 degrees many times per second. There are questions about this technology. Can it be made cheap enough or reliable enough for mass-market adoption? Spinning lasers are challenging to incorporate into car design; they have to be above the car like a small hat, and not too long ago, they were $80,000 each.
MEMS: The laser is fixed (solid-state) and is aimed at one or more mirrors; the mirrors move to direct the laser. Often a LiDAR consists of multiple lasers aimed at multiple mirrors to ensure the field of view is completely covered.
FMCW: The laser is a continuous stream with changing characteristics, the retuning laser beam interferes with the continuous stream being emitted by the vehicle and this interference can be interpreted to give the required information.
Time of Flight (ToF):
The time it takes for a burst to travel to an object and return is used to work out the distance traveled, and done at the pixel level, it gives an accurate view of what is ahead. The number of pixels (the point cloud density) dictates how much information is available.
The following table of information was gathered from the websites listed in the final row of the table.
The Competitive Situation
The product and its attributes are one thing but far more important is the companies' ability to sell the product. It is often not the best tech that wins.
The LiDAR manufacturers must sell their products to the companies making vehicles. Their success will solely be based on the relationships they develop with the tier 1 OEMs and the major car manufacturers.
In this case, the competitive advantage is in the sales channel.
The sales channel info is gleaned from press reports, many deals are likely in negotiation, and as these negotiations are kept private, it is impossible to have a complete understanding.
1. Velodyne
The advantage of first-mover is always important, and in this market, Velodyne was the first mover. They make and sell a spinning LiDAR using a 903nm laser that can sense up to 250m distance. Other LiDAR systems are under development but are not at the market yet.
Velodyne had a difficult 2021, its stock price fell more than 70%, and a series of problems beset it. Criterion Technology accused Velodyne of stealing trade secrets, and a leadership argument led to its founder's ousting, plus the Q2 2021 sales figures missed expectations.
I have real concerns about Velodyne's path to market; they said in 2021 that the number of multi-year contracts was up to 34 (from 26); however, these seem to relate to the high-value research LiDAR systems rather than any mass-market deals. They announced an agreement with QuinteQ that gave the share price a lift in January.
In the mass market, things have gone badly; at the beginning of 2021, Velodyne had firm commitments from three major auto manufacturers. All three of these have failed to generate sales. Ford, an early investor, divested its holding and stopped using Velodyne (canceling a project). Volvo and Hyundai used Velodyne for testing and research but moved to other suppliers. Velodyne is without any Tier 1 supplier or major car manufacturer (they do have Faraday), at least none that I could find. A complete waste of their first-mover advantage. The problem would appear to be the price Velodyne provides high-value spinning LIDARs. The last quoted price I could find was $75,000 at that price or anything near it the product will be unsuitable for anything other than testing and research.
Amazon announcement, on February 7th, 2022, Velodyne announced that it had entered an agreement with Amazon issuing a warrant for almost 40 million shares with an exercise price of $4.18 and a date in 2030. Amazon is expecting the price of Velodyne shares to increase, and they have a history of taking out a warrant in companies they intend to do business with. In 2017, Amazon signed a similar agreement with Plug Power (NASDAQ:PLUG); in the end, it did not go so well for Plug Power despite the initial news sending the price up nearly 70%. In March 2021, Plug recorded negative revenue because of the Amazon deal, and its shares plunged.
The deal with Amazon does not change my view of Velodyne's route to market, it may develop into something, but at the moment, Velodyne will not be on my buy list.
2. Aeye Inc
Aeye has a MEMS 1550nm LiDAR system using time of flight. Aeye was founded by an engineer responsible for mission-critical fighter jet targeting systems at Lockheed Martin. They have signed a deal with the tier 1 auto supplier "Continental," and the continental website is advertising the Aeye based LiDAR system with a mass production date of 2024.
Aeye is also being used (amongst others) by TuSimple (NASDAQ:TSP) the autonomous truck manufacturer. Aeye LiDAR is adaptive; once an objective is identified, the system focuses on that area sending more of its laser output in that direction.
Aeye claims that this technique improves range and reliability; it remains to be seen if these claims are as apparent in real-world applications as in testing.
The deal with Continental gives Aeye an excellent route to market.
3. Innoviz
This Israel based startup has a 905nm MEMS ToF system that has resistance to sunlight interference. Innoviz1 is production-ready, and the improved Innoviz2 will have demonstration units available in Q4 2022. Innoviz360 will be a spinning LiDAR and is currently in development.
Innoviz has made a significant commercial step forward with BMW announcing it will use the Magna Supplied Innoviz LiDAR system in production cars. The Series 7 models already have the system, and it will be incorporated into series 5 and series 3 cars soon.
The agreement is a massive win for Innoviz. Magna is one of the leading tier 1 supplier and BMW is a prestigious manufacturer. This deal alone puts Innoviz in the buy column.
Innoviz has two other potential mass-market channels. Hirani, the Chinese tier 1 supplier, and Harman (Samsung subsidiary) have signed development deals with Innoviz, but I have no news on how close these agreements are to the market.
4. Luminar
This German-based start-up has a 1550nm laser mechanical system (of its own design) that is making excellent commercial progress. Mobileye (Intel subsidiary) launched a robotaxi service using Luminar LiDAR.
Volvo announced they would use Luminar LiDAR in their electric SUV (already in production). Mercedes Benz announced they would use Luminar LiDAR in their premium vehicles when they took a small stake in the company last year.
Polestar has named Luminar its supplier, and Luminar has development agreements with Toyota and Audi, although there is no sales agreement yet.
Nvidia announced an agreement to use Luminar's long-range LiDAR as part of its self-driving car platform.
Of all the companies under review, Luminar would appear to have the best route to market with sales already made and big-name customers it seems very well placed.
These market moves make Luminar the third company in the buy column.
5. MicroVision
MicroVision has established tried and tested tech that they have been selling for several years. The US military is a regular customer, and MicroVision is adapting their 905 nm laser MEMS system for the Auto industry. MicroVision is integrating its radar system into the LiDAR product, adding even more detail. MicroVision claims immunity to other LiDAR systems and sunlight and a dense point cloud with equal long-range and short-range data. The point cloud data should be of significant additional value as it may be more accurate for AI, enabling faster recognition.
It could and should be a winning product; however, their market route is unclear. They appear to have no commercial deals and, in the latest Q3, discussed their plan to build a sales force and marketing strategy.
from the webcast on January 11th
We are directly marketing our products to OEMs, aiming to secure co-development deals, eventually leading to directed buy agreements.
It is a good strategy; however, I cannot invest in MicroVision with no current tier 1 deals and no important news about how these negotiations are going.
6. Ouster
Ouster has a similar product range to Velodyne; they started with high-end spinning radar and have developed via a takeover solid-state LiDAR. The solid-state flash LiDAR comes in short, medium, and long-range versions, but we have no clear evidence of a route to market. Ouster is making deals and selling its products into other markets but has not yet managed to break into the auto industry.
7. Aeva
This US-based Tech company is the only company in this review using FMCW lasers. FMCW would appear to have advantages; It is 4D, which gives velocity information at the pixel level immediately rather than being worked out by software. It has a more extended range than other systems, and Aeva has managed to provide it as LiDAR on a chip which is a first.
Unlike the other LiDAR systems mentioned, this one is inherently immune to interference from other LiDAR systems as well as sunlight. It would appear to be a technological improvement.
Aeva has a promising route to market, the parent company of Volkswagen has taken a stake, and Volkswagen is considering using the technology in future vehicles. Aeva with Volkswagen is one to watch, but the agreement is not yet a firm route to market. Volkswagen is testing the product, but that differs from a firm order or MoU.
The review of routes to market leaves us with three potential investments Luminar, Innoviz, and Aeye. All three have products good enough to get Tier 1 Auto companies to buy them, they should all be successful. I will next look at the finances and other information to decide which of them is likely to be the biggest success.
LiDAR Company financials
Do Luminar, Innoviz, and Aeye have enough cash on hand to get their products to market?
Balance sheet analysis of all three is shown below
The data is from Seeking Alpha financial pages.
No concerns here these three companies have plenty of cash on hand which was to be expected as they are new additions to the market. All three have more than three years cash runway.
Company Valuations
All three companies, along with the rest of the market, have low share prices at the moment (at least when compared to recent history). Using a DCF model and Wall Street target prices, I tried to come up with a valuation of the three.
Source: DCF valuations from SimplyWallStreet company pages, Wall Street targets from Seeking Alpha.
All three companies have significant upside, solid balance sheets, and an excellent route to market. Further review is needed to separate them.
Luminar
Wall Street has been falling out of love with Luminar; the target price moved lower again on February 1st; the average from 11 analysts fell from $28 to $25.70. A DCF value of $23 and a Wall Street target of $25.70 imply an upside of around 60%. Luminar made the surprising move of borrowing money to fund a share buyback scheme in December, covered on Seeking Alpha in this article by @stone fox capital. The share buyback scheme followed a significant purchase of shares by insiders. I wouldn't say I like borrowing money for share buyback at the best of times but particularly so when it is done by a pre-profit company still working to bring its product to market.
Aeye
Aeye has the biggest potential gain. Wall Street is targeting a +300% return, and the DCF gives a return of almost 3,000%; the DCF figure is based on management predictions of sales and assumes a terminal value of $22,000,000, which discounts back to a current value of $11,000,000. The cash flow forecasts show that positive free cash flow is achieved for the first time in 2025, increasing to more than a billion dollars by 2031.
These forecasts seem too good to be true and, in my experience, anything that looks too good usually is. It is three years before the company is forecast to generate any cash. An awful lot can happen to a company in three years. The technology is unique, untested in the real world, and not due to hit the market for three years.
As a result, Aeye will be joining the watch list. I will look to buy Aeye at some stage but not yet.
Innoviz
The deal with BMW means that Innoviz will start generating revenue this year; it will be the first of the companies I have looked at to have its Technology in mass-market production, which makes the forecasts for growth far more believable. We can look at the sales of BMW and use it as a proxy as BMW has committed to Innoviz LiDAR in all of its models.
The cash flow forecast is as follows
Innoviz has made excellent progress in other markets; the Innoviz 360 scanning LiDAR is significantly cheaper than competitive products and will be in full-scale production next year. Obayashi, the Japanese construction company, has been using LiDAR from Innoviz since 2018 and last month announced that it will be adding it to an automated crane system. This comes after three years of testing and is a testament to the reliability and quality of Innoviz products.
It is also worth noting that Ark Investments and Morgan Stanley have increased their stakes in Innoviz in the last 12 months (Morgan Stanley by 1000%).
Conclusion
In short: Innoviz has the products, the route to market, and the finances to succeed.
Innoviz is a clear winner of this review, my recommendation is to buy Innoviz with a target price of $8.40, a 100% increase, and to add Luminar plus Aeye to a watchlist and await further developments.
This article was written by Stephen Tobin
Having started my career working for BoA in the early 1990s (and completed my MBA), I have been actively researching and trading in the markets ever since. I spent most of my career working in the education field; I have been a senior manager in Educational establishments, both online and brick and mortar schools, for more than 20 years. I like to trade in small companies with disruptive technology using leverage; I focus on the areas I have particular knowledge of, Education and Renewable Energy. Typically my investments last a few months and rarely last as long as a year.
Feb. 10
https://seekingalpha.com/article/4485872-lidar-review-leading-to-buy-innoviz-recommendation
Summary
- The LIDAR market for vehicles is forecast to grow from $1.5 billion to more than $6 billion in the next few years.
- Established companies and new tech start-ups are chasing this market; most car manufacturers buy the technology rather than developing it in-house.
- The race is on to get products to market; choosing the right companies to invest in could lead to significant returns on investment in a relatively short time frame.
In this article, I provide a review of seven smaller companies hoping to sell LiDAR systems, most of them are tech start-ups, and all of them are small with a currently depressed share price.
The purpose of the review is to choose a LiDAR company to buy.
The LiDAR companies reviewed are Velodyne Lidar, Inc. (NASDAQ:VLDR), AEye, Inc. (NASDAQ:LIDR), Innoviz Technologies (NASDAQ:INVZ), Luminar Technologies (NASDAQ:LAZR), MicroVision, Inc. (NASDAQ:MVIS), Ouster, Inc. (NYSE:OUST), Aeva Technologies (NYSE:AEVA).
LiDAR is a reasonably straightforward idea. A laser is directed forward, bounces off an object, then a sensor collects the rebound. The software can then calculate the distance to the object by looking at how long it takes for the laser to get back to the sensor. Although the technology has significant limitations, it doesn't work in bad weather, and intense sunlight and other LiDAR interference are problems. It is becoming an integral part of autonomous vehicle sensing, and many semi-autonomous systems already use it.
A web literature review suggests the market for LiDAR is currently $1.5 billion with a CAGR between 12% and 16%. $7 billion by 2026 appears to be the consensus opinion. There is a wide variety of forecasts, and we must also consider the NODAR view held by Tesla and others. They believe that LiDAR is not needed and cameras alone are sufficient. The falling price of LiDAR and its increased accuracy plus the ongoing investment by significant players suggest that LiDAR is here to stay and that it will become a large market.
My opinion is that LiDAR will be a part of the sensing system used by autonomous and semi-autonomous vehicles along with Radar and Cameras. Manufacturers will likely integrate all three technologies into automobiles to provide improved safety.
The review will consider three points for each candidate company:
1. What technology are they using?
2. What is their route to market? Do they have a sales channel?
3. Company finances, have they got enough cash on hand?
LiDAR Technology
LiDAR companies have three crucial decisions.
What type of laser will they use? How will they direct the laser forward to hit different targets? What sensor technology will they use to collect the information?
Types of Laser
Power and hence range decisions are restricted by the need for the laser to be eye-safe. Most companies use 905nm or 1550nm lasers; the higher power 1550nm can go further and is inherently eye-safe; however, it is a new technology and requires expensive and sometimes toxic material to make and sense it.
905nm is lower power, limiting its range, but it is an older, well-understood technology that does not require exotic production materials. It is not inherently eye-safe, 905nm laser can reach the human retina, which is not true for the 1550nm. There is much debate about the safety of this technology and, at the moment, limited testing information. This article from LaserFocus World: Automotive LiDAR: Safety questions raised about 1550 nm LiDAR explains much of the debate.
Directing the laser at an object
Manufacturers are choosing one of four technologies, the goal is to make a reliable, low-cost sensor that enables AI to accurately interpret what is in front of a car.
Flash: a single wide-angle radar illuminates the entire field of view. Flash has range limitations and some accuracy concerns as every object in view only receives a fraction of the laser.
Spinning: These are the lasers we see on top of autonomous cars; the laser spins through up to 360 degrees many times per second. There are questions about this technology. Can it be made cheap enough or reliable enough for mass-market adoption? Spinning lasers are challenging to incorporate into car design; they have to be above the car like a small hat, and not too long ago, they were $80,000 each.
MEMS: The laser is fixed (solid-state) and is aimed at one or more mirrors; the mirrors move to direct the laser. Often a LiDAR consists of multiple lasers aimed at multiple mirrors to ensure the field of view is completely covered.
FMCW: The laser is a continuous stream with changing characteristics, the retuning laser beam interferes with the continuous stream being emitted by the vehicle and this interference can be interpreted to give the required information.
Time of Flight (ToF):
The time it takes for a burst to travel to an object and return is used to work out the distance traveled, and done at the pixel level, it gives an accurate view of what is ahead. The number of pixels (the point cloud density) dictates how much information is available.
The following table of information was gathered from the websites listed in the final row of the table.
The Competitive Situation
The product and its attributes are one thing but far more important is the companies' ability to sell the product. It is often not the best tech that wins.
The LiDAR manufacturers must sell their products to the companies making vehicles. Their success will solely be based on the relationships they develop with the tier 1 OEMs and the major car manufacturers.
In this case, the competitive advantage is in the sales channel.
The sales channel info is gleaned from press reports, many deals are likely in negotiation, and as these negotiations are kept private, it is impossible to have a complete understanding.
1. Velodyne
The advantage of first-mover is always important, and in this market, Velodyne was the first mover. They make and sell a spinning LiDAR using a 903nm laser that can sense up to 250m distance. Other LiDAR systems are under development but are not at the market yet.
Velodyne had a difficult 2021, its stock price fell more than 70%, and a series of problems beset it. Criterion Technology accused Velodyne of stealing trade secrets, and a leadership argument led to its founder's ousting, plus the Q2 2021 sales figures missed expectations.
I have real concerns about Velodyne's path to market; they said in 2021 that the number of multi-year contracts was up to 34 (from 26); however, these seem to relate to the high-value research LiDAR systems rather than any mass-market deals. They announced an agreement with QuinteQ that gave the share price a lift in January.
In the mass market, things have gone badly; at the beginning of 2021, Velodyne had firm commitments from three major auto manufacturers. All three of these have failed to generate sales. Ford, an early investor, divested its holding and stopped using Velodyne (canceling a project). Volvo and Hyundai used Velodyne for testing and research but moved to other suppliers. Velodyne is without any Tier 1 supplier or major car manufacturer (they do have Faraday), at least none that I could find. A complete waste of their first-mover advantage. The problem would appear to be the price Velodyne provides high-value spinning LIDARs. The last quoted price I could find was $75,000 at that price or anything near it the product will be unsuitable for anything other than testing and research.
Amazon announcement, on February 7th, 2022, Velodyne announced that it had entered an agreement with Amazon issuing a warrant for almost 40 million shares with an exercise price of $4.18 and a date in 2030. Amazon is expecting the price of Velodyne shares to increase, and they have a history of taking out a warrant in companies they intend to do business with. In 2017, Amazon signed a similar agreement with Plug Power (NASDAQ:PLUG); in the end, it did not go so well for Plug Power despite the initial news sending the price up nearly 70%. In March 2021, Plug recorded negative revenue because of the Amazon deal, and its shares plunged.
The deal with Amazon does not change my view of Velodyne's route to market, it may develop into something, but at the moment, Velodyne will not be on my buy list.
2. Aeye Inc
Aeye has a MEMS 1550nm LiDAR system using time of flight. Aeye was founded by an engineer responsible for mission-critical fighter jet targeting systems at Lockheed Martin. They have signed a deal with the tier 1 auto supplier "Continental," and the continental website is advertising the Aeye based LiDAR system with a mass production date of 2024.
Aeye is also being used (amongst others) by TuSimple (NASDAQ:TSP) the autonomous truck manufacturer. Aeye LiDAR is adaptive; once an objective is identified, the system focuses on that area sending more of its laser output in that direction.
Aeye claims that this technique improves range and reliability; it remains to be seen if these claims are as apparent in real-world applications as in testing.
The deal with Continental gives Aeye an excellent route to market.
3. Innoviz
This Israel based startup has a 905nm MEMS ToF system that has resistance to sunlight interference. Innoviz1 is production-ready, and the improved Innoviz2 will have demonstration units available in Q4 2022. Innoviz360 will be a spinning LiDAR and is currently in development.
Innoviz has made a significant commercial step forward with BMW announcing it will use the Magna Supplied Innoviz LiDAR system in production cars. The Series 7 models already have the system, and it will be incorporated into series 5 and series 3 cars soon.
The agreement is a massive win for Innoviz. Magna is one of the leading tier 1 supplier and BMW is a prestigious manufacturer. This deal alone puts Innoviz in the buy column.
Innoviz has two other potential mass-market channels. Hirani, the Chinese tier 1 supplier, and Harman (Samsung subsidiary) have signed development deals with Innoviz, but I have no news on how close these agreements are to the market.
4. Luminar
This German-based start-up has a 1550nm laser mechanical system (of its own design) that is making excellent commercial progress. Mobileye (Intel subsidiary) launched a robotaxi service using Luminar LiDAR.
Volvo announced they would use Luminar LiDAR in their electric SUV (already in production). Mercedes Benz announced they would use Luminar LiDAR in their premium vehicles when they took a small stake in the company last year.
Polestar has named Luminar its supplier, and Luminar has development agreements with Toyota and Audi, although there is no sales agreement yet.
Nvidia announced an agreement to use Luminar's long-range LiDAR as part of its self-driving car platform.
Of all the companies under review, Luminar would appear to have the best route to market with sales already made and big-name customers it seems very well placed.
These market moves make Luminar the third company in the buy column.
5. MicroVision
MicroVision has established tried and tested tech that they have been selling for several years. The US military is a regular customer, and MicroVision is adapting their 905 nm laser MEMS system for the Auto industry. MicroVision is integrating its radar system into the LiDAR product, adding even more detail. MicroVision claims immunity to other LiDAR systems and sunlight and a dense point cloud with equal long-range and short-range data. The point cloud data should be of significant additional value as it may be more accurate for AI, enabling faster recognition.
It could and should be a winning product; however, their market route is unclear. They appear to have no commercial deals and, in the latest Q3, discussed their plan to build a sales force and marketing strategy.
from the webcast on January 11th
We are directly marketing our products to OEMs, aiming to secure co-development deals, eventually leading to directed buy agreements.
It is a good strategy; however, I cannot invest in MicroVision with no current tier 1 deals and no important news about how these negotiations are going.
6. Ouster
Ouster has a similar product range to Velodyne; they started with high-end spinning radar and have developed via a takeover solid-state LiDAR. The solid-state flash LiDAR comes in short, medium, and long-range versions, but we have no clear evidence of a route to market. Ouster is making deals and selling its products into other markets but has not yet managed to break into the auto industry.
7. Aeva
This US-based Tech company is the only company in this review using FMCW lasers. FMCW would appear to have advantages; It is 4D, which gives velocity information at the pixel level immediately rather than being worked out by software. It has a more extended range than other systems, and Aeva has managed to provide it as LiDAR on a chip which is a first.
Unlike the other LiDAR systems mentioned, this one is inherently immune to interference from other LiDAR systems as well as sunlight. It would appear to be a technological improvement.
Aeva has a promising route to market, the parent company of Volkswagen has taken a stake, and Volkswagen is considering using the technology in future vehicles. Aeva with Volkswagen is one to watch, but the agreement is not yet a firm route to market. Volkswagen is testing the product, but that differs from a firm order or MoU.
The review of routes to market leaves us with three potential investments Luminar, Innoviz, and Aeye. All three have products good enough to get Tier 1 Auto companies to buy them, they should all be successful. I will next look at the finances and other information to decide which of them is likely to be the biggest success.
LiDAR Company financials
Do Luminar, Innoviz, and Aeye have enough cash on hand to get their products to market?
Balance sheet analysis of all three is shown below
The data is from Seeking Alpha financial pages.
No concerns here these three companies have plenty of cash on hand which was to be expected as they are new additions to the market. All three have more than three years cash runway.
Company Valuations
All three companies, along with the rest of the market, have low share prices at the moment (at least when compared to recent history). Using a DCF model and Wall Street target prices, I tried to come up with a valuation of the three.
Source: DCF valuations from SimplyWallStreet company pages, Wall Street targets from Seeking Alpha.
All three companies have significant upside, solid balance sheets, and an excellent route to market. Further review is needed to separate them.
Luminar
Wall Street has been falling out of love with Luminar; the target price moved lower again on February 1st; the average from 11 analysts fell from $28 to $25.70. A DCF value of $23 and a Wall Street target of $25.70 imply an upside of around 60%. Luminar made the surprising move of borrowing money to fund a share buyback scheme in December, covered on Seeking Alpha in this article by @stone fox capital. The share buyback scheme followed a significant purchase of shares by insiders. I wouldn't say I like borrowing money for share buyback at the best of times but particularly so when it is done by a pre-profit company still working to bring its product to market.
Aeye
Aeye has the biggest potential gain. Wall Street is targeting a +300% return, and the DCF gives a return of almost 3,000%; the DCF figure is based on management predictions of sales and assumes a terminal value of $22,000,000, which discounts back to a current value of $11,000,000. The cash flow forecasts show that positive free cash flow is achieved for the first time in 2025, increasing to more than a billion dollars by 2031.
These forecasts seem too good to be true and, in my experience, anything that looks too good usually is. It is three years before the company is forecast to generate any cash. An awful lot can happen to a company in three years. The technology is unique, untested in the real world, and not due to hit the market for three years.
As a result, Aeye will be joining the watch list. I will look to buy Aeye at some stage but not yet.
Innoviz
The deal with BMW means that Innoviz will start generating revenue this year; it will be the first of the companies I have looked at to have its Technology in mass-market production, which makes the forecasts for growth far more believable. We can look at the sales of BMW and use it as a proxy as BMW has committed to Innoviz LiDAR in all of its models.
The cash flow forecast is as follows
Innoviz has made excellent progress in other markets; the Innoviz 360 scanning LiDAR is significantly cheaper than competitive products and will be in full-scale production next year. Obayashi, the Japanese construction company, has been using LiDAR from Innoviz since 2018 and last month announced that it will be adding it to an automated crane system. This comes after three years of testing and is a testament to the reliability and quality of Innoviz products.
It is also worth noting that Ark Investments and Morgan Stanley have increased their stakes in Innoviz in the last 12 months (Morgan Stanley by 1000%).
Conclusion
In short: Innoviz has the products, the route to market, and the finances to succeed.
Innoviz is a clear winner of this review, my recommendation is to buy Innoviz with a target price of $8.40, a 100% increase, and to add Luminar plus Aeye to a watchlist and await further developments.
This article was written by Stephen Tobin
Having started my career working for BoA in the early 1990s (and completed my MBA), I have been actively researching and trading in the markets ever since. I spent most of my career working in the education field; I have been a senior manager in Educational establishments, both online and brick and mortar schools, for more than 20 years. I like to trade in small companies with disruptive technology using leverage; I focus on the areas I have particular knowledge of, Education and Renewable Energy. Typically my investments last a few months and rarely last as long as a year.
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