LiDAR, or Light Detection and Ranging technology, is fast gaining traction in the autonomous vehicle industry, in addition to verticals such as augmented reality. Several electric vehicles (EVs) as well as legacy automobile manufacturers will adopt this technology in the future, making companies that participate in this market solid long-term bets.
The lidar market is forecast to grow at a 22.7% annual clip to hit $6.71 billion by the end of 2026. The technology could very well be the catalyst of the fourth industrial revolution, at least in the autonomous driving segment.
Velodyne Lidar is valued at a market cap of $1.24 billion
Velodyne Lidar in San Jose, Calif., is a company that provides a real-time 3D vision for autonomous systems. It is valued at a market cap of $1.24 billion. Velodyne offers a wide range of surround-view lidar to support multiple end applications that include autonomous vehicles, security and mapping, and drones.
VLDR provides Vella, a software solution for any vehicle that uses Velarray LiDAR. The company’s lidar-based smart vision solutions are used in other segments, such as autonomous mobile robots, unmanned aerial vehicles, last-mile delivery, advanced security systems, and smart city initiatives.
While the company’s sales have fallen to $95.3 million in 2020 from $143 million in 2018, it is forecast to decline by another 18% to $78.4 million in 2021, before rising by a stellar 97% to $155 million next year. This values the stock at a forward price to 2022 sales multiple of 8x, which is not too expensive if the company can continue to expand its top line going forward.
Last month, Velodyne disclosed a multi-year agreement with TOPODRONE, which is a Switzerland-based company. Velodyne will provide lidar sensors to TOPODRONE that provide high-precision solutions for aerial surveys, allowing the latter to map and generate 3D models for demand environments.
Velodyne has also inked a multi-year deal to provide its Puck lidar sensors to Renu Robotics, which provides autonomous vegetation management systems. These partnerships should be key drivers of revenue growth for Velodyne.
Innoviz Technologies has a market cap of $676 million
Innoviz Technologies designs and manufactures solid-state LiDAR sensors and develops perception software that will accelerate the mass-production of autonomous vehicles. Its InnovizOne is a LiDAR sensor designed for auto manufacturers and robotaxi, trucking, and delivery companies. INVZ is headquartered in Rosh HaAyin, Israel.
Valued at a market cap of $676 million, Innoviz Technologies has increased its sales to $5.46 million in 2020 from $1.56 million in 2019. But like other tech companies in a nascent industry, Innoviz allocates a sizable portion of its capital to research and development.
In 2019, its research and development expenses stood at $57 million. In the last 12-month this figure has increased to $78 million, which caused Innoviz to end the last 12-month period with a $126 million operating loss.
Both Velodyne Lidar and Innoviz Tech are companies that have huge long-term potential but also carry significant risks due to widening losses and lack of revenue visibility. The two companies will have to raise equity capital multiple times to fund expansion plans, which is bound to dilute shareholder wealth at an alarming rate.
The risk-reward ratio is skewed towards VLDR. But I believe investors should wait and watch for a few quarters before buying shares of either of these two companies.
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VLDR shares rose $0.04 (+0.65%) in after-hours trading Friday. Year-to-date, VLDR has declined -73.01%, versus a 20.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
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