Light detection and ranging (LiDAR) technology is one of the most advanced methods for mapping environments. One of the technology’s most promising use cases is in the field of autonomous vehicles. By allowing cars to develop a detailed picture of the environment around them, LiDAR systems may one day facilitate the development of fully self-driving autonomous vehicles.
One of the many companies attempting to commercialize LiDAR technology for autonomous vehicles is Innoviz (NASDAQ:INVZ). Based in Israel, Innoviz aims to eventually become the default LiDAR hardware producer for many of the major auto companies.
Down 64.9% year-to-date now, Innoviz may well be trading at a discount, so is it time to buy?
Is Innoviz a Good Stock to Buy?
The primary bull argument put forward by Innoviz is that the company is uniquely positioned to seize market share during the early stages of automotive LiDAR market growth.
This argument carries considerable weight. After all, the market for automotive LiDAR is expected to grow from under $800 million as recently as 2021 to $11.7 billion by 2031. If Innoviz really can capture a substantial portion of this market by leveraging its early-mover status, the company could generate enormous revenue growth as a result.
Early indications suggest that Innoviz is succeeding in its efforts to attract market share. Earlier this year, the company finalized a Tier 1 supplier partnership with Volkswagen.
This agreement will initially see Innoviz designing LiDAR technology for the company’s Audi line. Over time, though, other Volkswagen brands pursuing autonomous driving capabilities will also likely work with Innoviz. The company is also actively working with BMW on LiDAR modules for its 7 Series vehicles.
On the other hand, it’s not yet clear that LiDAR will be the technology that ultimately powers the autonomous vehicle revolution. LiDAR technology works by emitting pulses of last light, which then bounce off of objects nearby. Using millions of these pulses, a LiDAR system allows an AV to build up a representation of the area around it.
The downside, however, is that this technology is not visual in the true sense. In other words, a LiDAR system can detect objects in its vicinity but may not be able to properly identify them. This creates the possibility of a vehicle stopping for unimportant obstructions, such as trash in the road.
Furthermore, Innoviz’s recent losses call into question whether the company itself will be able to survive without raising additional funding or going into debt.
Over the past 12 months, the company has lost $126.9 million on sales of just $6 million. While full-year revenues for 2023 are expected to be in the range of $15-20 million, it’s clear that the company is still far from closing the gap between its operating losses and its revenues.
Finally, the regulatory hurdles AVs face could push Innoviz’s returns far into the future. With questions surrounding liability and the need for new federal and state regulatory standards to handle AV technology, it could be several years before fully autonomous vehicles are cleared for use on American roads.
While Innoviz’s technology will likely be used in partially autonomous driving systems well before then, the company’s returns could be slow until AV technology achieves broader deployment.
Taking all of this into account, Innoviz appears to be a classic high-risk, high-reward stock. With a significant foothold in what is expected to be a fast-growing market, there is little doubt that Innoviz has significant potential. The fact that LiDAR-driven autonomous vehicles remain unproven, however, represents a significant risk.
In short, Innoviz is a gambit that remains a speculative bet at this time, albeit with potentially large upside, but how much?
Is Innoviz Technologies Stock Undervalued?
Although the company could have enormous growth potential if LiDAR ultimately facilitates the mass rollout of autonomous vehicles, its current valuation metrics are not particularly attractive.
With a price-to-sales ratio of over 38, investors are paying a large premium predicated on Innoviz’s expected future growth potential. The company does, however, trade at a relatively modest price-to-book ratio of 1.4.
With that said, the company’s current agreements with major automakers and the projected growth of the automotive LiDAR market have made analysts quite bullish on the stock’s value proposition.
Innoviz is undervalued by 492% according to the six analysts covering the stock with a consensus price target of $8.17 per share.
The range of estimates over the coming 12 months is from $3 to $13 per share. Given that INVZ currently trades at just $1.34, this range would imply an upside of anywhere from 120 to 855 percent.
Investors should treat such projections with caution, however, as the stock is down by around 65 percent for the year and may fall further if the company continues to lose money at its current pace.
What Is the Biggest LiDAR Company?
The largest LiDAR company by market cap is Luminar Technologies (NASDAQ:LAZR).
Valued at about $1.3 billion, Luminar is worth more than five times Innoviz.
Like Innoviz, Luminar focuses on the deployment of LiDAR for self-driving automobiles.
What Is the Earnings Forecast for INVZ?
Because of the uncertainties of the automotive LiDAR market, it’s difficult to make projections with high conviction about INVZ’s future.
However, most analysts assume that the company will remain unprofitable through at least 2025 while gradually paring back its losses. The 2024 earnings forecast for INVZ is -$0.76 per share while the 2025 consensus EPS estimate is for a loss of $0.38 per share.
If this is the case and Innoviz continues to expand its partnerships with major auto brands, investors could see solid returns on their shares as the company gets closer to eventual profitability.
Who Makes LiDAR for the Apple Car?
Outside of the auto majors, tech giant Apple is also slowly progressing toward the release of its own AV.
As part of this effort, the company has explored various LiDAR supplier options. Apple appears to have ultimately settled on Guangda, a Taiwan-based company that also makes LiDAR hardware for the iPhone.
Who Does Tesla Buy LiDAR From?
While many automakers are investing in LiDAR research to achieve autonomous driving, Tesla has remained highly skeptical of the technology.
The EV giant prefers to use a combination of cameras and computer vision technology, which CEO Elon Musk believes will allow for a closer approximation of human driving in the long run.
Tesla has, however, conducted tests using LiDAR systems made by Luminar.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.