We examine two companies providing the LiDAR sensor technology for autonomous vehicles and ask which is a better investment today?
Dec. 2, 2021
With autonomous vehicles set to hit the roads in the coming years, LiDAR technology (which scans and maps out the surveyed environment) will be critical and we delve into two companies producing this technology and ask which is a better buy?
MicroVision: Bull v.s. Bear arguments:
MicroVision (NASDAQ: MVIS) was founded in 1993 and predominantly focused on the development of LiDAR technology to be used in autonomous driving. It went public in 1999 and caught the attention of Reddit WallStreetBets, causing the stock to surge a few thousand percent in early 2021 before retreating.
MicroVision is targeting the automotive LiDAR market that is reportedly growing at a 30% compound annual growth rate between 2020-2028, leaving a significant opportunity. In its most recent earnings, management stated that it has received "encouraging feedback" from potential customers on its long-range automotive sensor, with production set to start in 2022.
In its latest quarter, MicroVision earned revenue from royalties totaling $0.7 million in Q3 2021, an increase of $0.1 million year-over-year (YoY). The company has a relatively healthy balance sheet with $125.1 million in cash and cash equivalents in the latest quarter.
The company is burning cash, which resulted in an expanding net loss of $9.4 million in Q3. It also pushed back the production of its sensors which means that the company will not make any significant revenue anytime soon. In addition, it is failing to attract new customers, and in 2020, one customer accounted for 97% of revenue.
Management stated in February 2020 that the company is looking into the potential sale or merger of the company. However, any such deal is yet to materialize.
Luminar Technologies Inc.: Bull v.s. Bear arguments:
Luminar Technolgoies Inc. (NASDAQ: LAZR) is a company producing vision-based LiDAR and machine perception technologies. The company's mission is "to make autonomous driving safe and ubiquitous" and was founded in 2012 by CEO Austin Russell.
The company claims that its technology is the only LiDAR sensor that meets the performance, safety and cost requirements to enable level 3 through to level 5 autonomous driving capabilities. To put this layman's terms, level 3 means that the car can make decisions but requires human override, whereas level 5 does not require human attention.
Luminar Technologies has partnered with 7 of the top 10 global automakers, and its technology is set to be used in Volvo's new electric SUV set to be unveiled in 2022. The company has also partnered with Airbus to explore LiDAR capabilities in aerospace which could expand its market opportunity. In Q3 2021, it reported revenue growth of 89% YoY, reaching $8 million, while it has $544 million of cash and cash equivalents.
However, the company is operating at a net loss of $51.3 million in the quarter. It is trading at a rich valuation with a price to sales multiple of 276, which will require flawless execution.
So, which stock is a better buy right now?
Despite its valuation, Luminar Technologies appears to be a better buy today as it appears to have a fundamentally better business along with some large partners.
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