With a focus on improving road safety, reducing carbon emissions, and lowering transportation costs, autonomous vehicles (AV) have proved to be a revolutionary concept in the automotive industry. The development of a supportive regulatory framework, intensive R&D activities, and investments in digital infrastructure are accelerating the self-driving car market’s growth. The global self‑driving car market size is anticipated to expand at a CAGR of 63.1% from 2021 to 2030.
The COVID-19 pandemic has led to a substantial boost in interest in the autonomous vehicle space. The pandemic has opened vehicle manufacturers’ eyes to the importance of investing in contactless technologies and greater automation.
Logistics companies, delivery companies and the food service industry have already adopted the driverless cars. Moreover, governments worldwide are administering supportive regulations to enhance the adoption of AVs. For instance, the U.S. government is already procuring AVs for defense applications, while the U.K. government is expected to soon grant permission to operate self-driving cars on roads.
Given this background, tech giants Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), and Intel Corporation (INTC) are branching out into this high-growth segment. These companies aim to leverage their financials and technological prowess to make break-through innovations in the field of AV.
Microsoft Corporation (MSFT)
MSFT has made its name with innovative software design and user-friendly computer operating systems. MSFT develops, licenses, and supports a range of software products and services worldwide. The company’s global cloud services platform ‘Azure’ is one of the most popular cloud platforms in the world. MSFT operates through three segments – Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.
A week ago, MSFT teamed up with Volkswagen Group to collaborate on building a cloud-based Automated Driving Platform (ADP) on Microsoft Azure. They plan to leverage its computational and data capabilities to deliver automated driving experiences at global scale. The partnership should accelerate the development of automated driving for passenger cars.
Last month , 2020, MSFT entered a long-term strategic relationship with General Motors Company (GM) and Cruise LLC to accelerate the commercialization of self-driving vehicles. The companies will bring together their software and hardware engineering experience , cloud computing capabilities, manufacturing know-how and partner ecosystem to create a safer, cleaner, and more accessible mobility. MSFT’s revenues have increased 16.7% year-over-year to $43.08 billion in the fiscal second quarter ended December 31, 2020. Accelerating demand for the company’s differentiated offerings drove its commercial cloud revenue to $16.70 billion, up 34% year over year. Its operating income grew 28.8% from the year-ago value to $17.90 billion, while its EPS improved 34% to $2.05 over the same period. MSFT returned $10 billion to shareholders in the form of share repurchases and dividends in the second quarter, an increase of 18% year-over-year.
Analysts expect MSFT’s revenues to grow 17.2% year-over-year to $41.03 billion in the current quarter, ending March 31, 2021. A consensus EPS estimate of $1.77 for the current quarter represents a 26.4% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 15.9% over the past six months.
MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
MSFT has a B grade for Momentum, Quality and Stability and an A for Sentiment. Within the Software – Application Industry, the stock is ranked #12 of 107 stocks.
In total, we rate MSFT on eight different levels. Beyond what we stated above, we also have given MSFT grades for Value and Growth. Get all of MSFT’s ratings here.
Alphabet Inc. (GOOGL)
The global leader in digital advertising space, GOOGL, needs no introduction. With a market capitalization of $1.43 trillion, GOOGL is the fourth-largest company in the U.S and commands an approximately 90% share of the global internet search engine market. It is a member of the elite FAANG group, which represents the most popular stocks in the tech sector and is currently ranked #11 in the Fortune 500 list.
GOOGL-owned self-driving car pioneer Waymo is the leader of autonomous vehicle technology; it was the first company to roll out a Level 5 fully AV. Although Waymo is still in its startup phase, the company is already valued at $30 billion. In October 2020, Waymo won the race to launch the first Level 4 fully driverless vehicle service in the United States. Waymo One users in the Phoenix area can now avail themselves of fully driverless rides from Waymo’s fleet of more than 300 vehicles.
In mid-January, GOOGL partnered with Nokia to jointly develop cloud-native 5G core solutions for communication service providers and enterprise customers. 5G and cloud communications platforms are expected to drive the international markets in coming years, thereby allowing both companies to capitalize on emerging industry-disrupting trends.
GOOGL’s total revenues have increased 23.5% year-over-year to $56.90 billion in the fourth quarter, ended December 31, 2020. Its operating income has increased 68.9% from its year ago value to $15.65 billion, while its net income has grown 42.7% to $15.23 billion over the same period. Its EPS has increased 45.3% from the prior-year quarter to $22.30.
Analysts expect GOOGL’s revenues to grow 25% year-over-year to $51.45 billion in the current quarter, ending March 31, 2021. A consensus EPS estimate of $15.93 for the current quarter represents a 61.4% improvement from the year ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. GOOGL has gained 39.2% over the past six months.
GOOGL’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our rating system. GOOGL has a B grade for Momentum and Quality and an A for Sentiment. It is currently ranked #1 of 67 stocks in the Internet Industry.
Click here to see the additional POWR Ratings for GOOGL (Stability, Value and Growth)
Intel Corporation (INTC)
INTC is a leading semiconductor chip manufacturer that markets essential semiconductor technologies for the cloud and smart and connected devices worldwide. The company operates through five segments–PC Client Group, Data Center Group, Internet of Things Group, Mobile and Communications Group, Software and Services, and Others.
The semiconductor giant Intel acquired Israeli self-driving tech company Mobileye for $15.3 billion in 2017. Mobileye is the world’s leading producer of advanced driver-assistance systems. The company currently has data-sharing agreements with six partners, including Volkswagen, BMW and Nissan. Mobileye reportedly gathers roughly five million miles of data every day, making it a major player in the AV space.
INTC has undergone several leadership changes over the last month. The company appointed Sunil Shenoy as its Vice President of Design Engineering Group and Pat Gelsinger as the CEO. The company seeks to boost its position in the chip making arena by leveraging new leaders with decades of experience.
Also in January, INTC launched its 11th Gen Intel Core vPro platform and Intel Evo vPro platform that will deliver the highest performance and most comprehensive hardware-based security. It also introduced a new N-series 10-nanometer Intel Pentium Silver and Intel Celeron processors.
INTC’s non-GAAP revenues have increased 8% year-over-year to $77.90 billion in the fiscal year ended December 26, 2020. Its non-GAAP net income has risen 3% from the year-ago value to $22.40 billion, while its non-GAAP EPS increased 7% from the same period last year to $5.30. Its non-GAAP free cash flow has increased 25% year-over-year to $21.10 billion.
Analysts expect INTC’s EPS to rise at a rate of 5.4% per annum over the next five years. The company has an impressive earnings surprise history; it surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 27.7% over the past six months.
It’s no surprise that INTC has an overall rating of B, which translates to Buy in our POWR Ratings system. INTC has an A grade for Value and Quality and B for Sentiment and Momentum. Of the 96 stocks in the B-rated Semiconductor & Wireless Chip Industry, it is ranked #10.
Beyond what we stated above, we have also given INTC grades for Growth and Stability. Get all the INTC ratings here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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MSFT shares were trading at $243.79 per share on Thursday afternoon, down $0.41 (-0.17%). Year-to-date, MSFT has gained 9.86%, versus a 4.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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