We recently compiled a list of the 10 Best Lidar Stocks To Buy Now. In this article, we are going to take a look at where Luminar Technologies, Inc. (NASDAQ:LAZR) stands against the other Lidar stocks.
The global lidar sensor industry is quite sizeable. According to research from McKinsey & Well, the sector was worth $2.5 billion in 2022 and is estimated to grow at a compounded annual growth rate (CAGR) of 10.3% to be worth $5.4 billion by 2030 end. This research report is important because it sheds light on one of the most under reported use cases of lidar. While most media coverage focuses on mobility and terrestrial lidar applications, McKinsey & Well shares that the airborne lidar market is expected to outpace the broader industry in growth terms through a CAGR of 10.9%. Geographically, while the US lidar sensor market was estimated to be worth $672 million in 2022, China will outpace the industry’s growth. The Asian country’s market is estimated to grow at a rate of 15.3% and sit at $1.3 billion by 2030 end.
This research provides us with key details when considering the factors that one must consider when investing in lidar stocks. While most hype surrounding them comes from autonomous vehicles and driver assistance platforms, firms that have Chinese exposure and sell airborne lidar products can do well provided that global trade tensions do not lead to foreign firms facing problems in China. Apart from Chinese exposure and the potential to cater to airborne lidar, other financial factors are also important.
Since lidar is a relatively smaller and nascent market as opposed to say, application processors for smartphones, firms that have secured contracts to supply lidar sensors are better than those that haven’t. Financially, gross margins (1), operating expense (2), debt profile (3), and overall cash reserves (4) are key metrics to see whether lidar stocks and companies will be able to finance their operations and gain market share in the future. Let’s put this into practice. Two lidar stocks are relevant as they seemingly lie on opposite ends of the sentiment spectrum. The first is 2nd worst AR stock to buy according to short sellers while the second was the fourth top long term stock pick of a billionaire’s hedge fund as of Q3 2023.
Starting from the lidar stock that short sellers love, for financial metrics 1, 2, 3, and 4, the results are 51%, $96.7 million, a debt to asset ratio of 0.14, and $56.8 million in cash and equivalents, respectively. This is troubling, as cash reserves are insufficient to fund operations for a year, but the firm has some room to generate funding by raising debt. It also reflects the stock’s 25.8% short interest of 25.8%. For the billionaire’s long term lidar stock pick, it has a negative gross margin, $455 million in operating expense, a debt to asset ratio of 1.74, and $161 million in cash and equivalents. Looking at the financials, it’s unsurprising that the billionaire dumped this stock during Q4 2023, and the stock’s woes are also due to its contract to supply Volvo with lidar sensors for the EX90 electric vehicle.
Shifting gears, it’s important to analyze the underlying technology that drives lidar demand and leads to revenue for the stocks. On the autonomous vehicle front, Chinese firm Hesai secured mass production designations from the Chinese joint ventures of two of America’s biggest conventional auto manufacturers and Audi. This is key for any lidar stock as it ensures that the firm can generate revenue via products that are being sold on the market, and it adds stability to the firm as Chinese giant Baidu is already using its products too. Lidar, short for light detection and ranging, uses a laser to map out an environment by analyzing reflected lasers. This means that laser wavelength, point rates, field of view, and angular resolution are key technological metrics for determining lidar efficacy.
The Chinese lidar company that won the mass production has some of the highest end lidar systems in the world. Its leading edge product, the AT512 system for autonomous vehicle use has a whopping point rate of 12.3 million points per second, 300 meter range at 10% reflectivity, and a 120 degree horizontal field of view. Other autonomous driving systems have a 360 degree field of view along with a 3.6 million points per second point rate.
Similarly, while the billionaire hedge fund’s lidar stock that we’ve mentioned above does not provide a point rate, the value can be inferred. It states that the Iris lidar system is able to analyze 300 points per square degree, so in the best case scenario of the system being able to scan a complete sphere, the value is 12.4 million points. Finally, the second favorite short seller lidar stock pick that we shared above offers a system with 14 million points per second and a 120 degree field of view.
Looking at these systems, it appears that point rates, field. of view, and country of origin are key determinants of lidar’s market performance. Additionally, while several autonomy firms use lidar, including Google’s Waymo which has self developed a lidar system, there are others that don’t. One of lidar’s most well know critics is none other than Elon Musk. A lidar is, after all, a laser, and Musk believes that traditional cameras can offer superior results. Having called lidar a “fool’s errand,” the executive commented during his company’s Q1 2021 earnings call:
“When your vision works, it works better than the best human because it’s like having eight cameras, it’s like having eyes in the back of your head, beside your head, and has three eyes of different focal distances looking forward. This is — and processing it at a speed that is superhuman. There’s no question in my mind that with a pure vision solution, we can make a car that is dramatically safer than the average person.”
Musk believes that cameras offer superior imaging capabilities especially when their input is coupled with the necessary computing power. However, while he might be the only car company executive taking this approach, his supporters felt vindicated when a pure play autonomous driving systems developer which is the eighth best autonomous driving stock to buy according to short sellers announced just this month that it had stopped developing lidar systems. The decision appears to have stemmed from both technology and cost drivers, as it stated that “substantial progress on our EyeQ6-based computer vision perception” as well as “continued better-than-expected cost reductions in third-party time-of-flight lidar units” were some of the factors that drove it.
Our Methodology
To make our list of the best lidar stocks, we first compiled a set of 14 stocks with a direct presence in the industry after research. Then, they were ranked by the number of hedge funds that had bought the shares during Q2 2024 and the top stocks were selected.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A factory worker using an ultra-sensitive pixel-based sensor while working on an automobile.
Luminar Technologies, Inc. (NASDAQ:LAZR)
Number of Hedge Fund Holders In Q2 2024: 8
Luminar Technologies, Inc. (NASDAQ:LAZR) was the stock that the billionaire hedge fund dumped in the intro to our piece. While its primary line of business is the automotive industry, the firm also caters to the aerospace and defense industry. Luminar Technologies, Inc. (NASDAQ:LAZR) benefits from its sizeable deal with the German auto giant Volvo, as it provides it with a stable customer with an established demand for its vehicles. However, since the firm has not announced any new deals as of late, it also means that Luminar Technologies, Inc. (NASDAQ:LAZR)’s future hinges on Volvo. Any potential delays to production and rollout, as have been the case lately, do not bode well for the firm since $455 million in operating expenses and $161 million in cash create a worrying picture for its future. In fact, Luminar Technologies, Inc. (NASDAQ:LAZR) might have to rely on share issues to raise cash, since its debt to asset ratio is 1.74. However, as of March, management expects to reach full profitability by 2025.
Luminar Technologies, Inc. (NASDAQ:LAZR)’s management commented on how it’s handling its debt and cash position during the Q2 2024 earnings call:
“Today, we’ve signed a definitive deal with our bond investors for Luminar to be able to reduce and restructure our outstanding debt, exchanging around $422 million in notes for $274 million and pushing out their maturity for 2026 to 2030.
We’ve heard feedback and know-how important this debt topic was for some investors to derisk the business, so we can realize our full upside and this is our solution. Additionally, the investor agreed to provide Luminar with $100 million of new non-dilutive debt capital. Combined, this gives us the resources and runway to be able to execute the opportunity to realize our full potential. It’s a huge vote of confidence that Luminar is not only here to stay as a cornerstone of our industry, but that we can thrive throughout the decade.”
Overall LAZR ranks 4th on our list of the best Lidar stocks to buy. While we acknowledge the potential of LAZR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LAZR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.