In this piece, we will take a look at the ten best lidar stocks to buy now.
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.
A close-up of a LiDAR-on-chip sensor mounted in a consumer-grade electronic device.
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).
10. Semilux International Ltd. (NASDAQ:SELX)
Number of Hedge Fund Holders In Q2 2024: 3
Semilux International Ltd. (NASDAQ:SELX) is a Taiwanese firm that makes and sells lasers and other devices that are used in lidar systems. The firm’s location in Taiwan provides it with benefits in terms of proximity to a well developed semiconductor and technology supply chain as well as easy access to the Chinese autonomous vehicle market. Semilux International Ltd. (NASDAQ:SELX) has also partnered up with Apple supplier Foxconn to provide its EV manufacturing business with lidar equipment. This could provide catalysts in the future, as Foxconn plans to expand its operations by manufacturing EVs as well. However, Semilux International Ltd. (NASDAQ:SELX) has only submitted its lidar prototypes to Foxconn as of 2022, and a lack of partnerships with established car companies means that car revenue in the future is unlikely. Its full year 2023 results were also disappointing, with revenue dropping 68% annually which led to a $2 million net loss.
9. Hesai Group (NASDAQ:HSAI)
Number of Hedge Fund Holders In Q2 2024: 4
Hesai Group (NASDAQ:HSAI) is the lidar company that we covered in detail in our introduction to this piece. As opposed to Semilux, the firm has key industrial partnerships that enable it to project future cash flows and ensure a market presence. Hesai Group (NASDAQ:HSAI)’s partnership with Baidu, with the firm being the only lidar partner of the Chinese firm, is quite important. Baidu is one of the leaders in China when it comes to the ground presence of autonomous vehicles which provides Hesai Group (NASDAQ:HSAI) with a stable source of product demand. Additionally, the firm’s presence in China means that it can leverage low costs to reduce lidar unit prices, which is important since the cost is one of the biggest auto maker concerns when it comes to lidar imaging technology. However, Hesai Group (NASDAQ:HSAI) can face global regulatory headwinds that limit its business in China, especially if trade tensions between the East and the West lead to sanctions or higher tariffs on Chinese goods or EVs. Additionally, any delay in EV rollout, such as the recent one by Hesai Group (NASDAQ:HSAI)’s customer Li Auto, could lead to headwinds. The Chinese uncertainty is also baked into the share price, through a price to forward sales ratio of 1.98 compared to a near peer’s 4.66.
8. Cepton, Inc. (NASDAQ:CPTN)
Number of Hedge Fund Holders In Q2 2024: 5
Cepton, Inc. (NASDAQ:CPTN) is a diversified American lidar company that provides solutions for smart cities, cars, and industrial applications. This sets it apart from several lidar companies, and it ensures that the firm has a stable order flow and stream even if the automotive industry slows down, if car companies develop their own systems, or if another technology replaces lidar. Cepton, Inc. (NASDAQ:CPTN)’s pure play nature as a lidar company allows it to rapidly iterate products and expand its portfolio by releasing tertiary software products. For instance, the firm offers a lidar simulator called StudioViz which seeks to address automaker pain points of high data collection costs and long development times. However, Cepton, Inc. (NASDAQ:CPTN) has faced some troubles recently, especially during the tail end of 2023 when GM canceled a deal with the firm to produce headlights with built in lidars. Additionally, Cepton, Inc. (NASDAQ:CPTN) was also acquired by its manufacturing partner in July and is now a subsidiary.
Cepton, Inc. (NASDAQ:CPTN)’s management commented on the GM deal during the Q2 2024 earnings call:
“Since I’m kind of on the forefront of the customer side, I’ll answer you first. This is Mitch. Yes, there’s a lot of lessons learned from the GM program that go into our product evolution, you show that — you see that showing up in our new Ultra product. So all of the design and manufacturing lessons learned are built into our Ultra product. You see it in our new software ecosystem product called StudioViz that we announced last week. Again, this is pretty unique in the industry in that it takes into account all the manufacturing variances of building a lidar. And then I think maybe one of the last, but not least, important lesson learned is the supply chain. We have — we’re carrying over some of the suppliers that worked really well on the GM project and find new suppliers as their product has evolved. So yes, it puts us in a very competitive position for these new RFQs.”
7. Innoviz Technologies Ltd. (NASDAQ:INVZ)
Number of Hedge Fund Holders In Q2 2024: 6
Innoviz Technologies Ltd. (NASDAQ:INVZ) is an Israeli company that focuses on selling lidar sensors and software for autonomous driving. Its location is key, since if you read the intro to this piece, you’d know that Israeli autonomous driving firm Mobileye decided to stop its internal lidar development and switch to third party solutions instead. This means that Innoviz Technologies Ltd. (NASDAQ:INVZ) can see order growth in the future, and its shares shot up by 5.6% on the day of the announcement and are up by 48% since then. At the same time, while the firm might be seeing additions to its total addressable market due to the broader shift to third party lidar, its dependence exclusively on the auto industry means that Innoviz Technologies Ltd. (NASDAQ:INVZ) can face headwinds if lidar adoption is slow or if the industry moves to a different standard. While the firm is yet to turn a profit, its revenue grew by 448% during H1 2024 and sat at $13.7 million.
6. MicroVision, Inc. (NASDAQ:MVIS)
Number of Hedge Fund Holders In Q2 2024: 7
MicroVision, Inc. (NASDAQ:MVIS) is an American company that exclusively focuses on lidar applications for autonomous driving and autonomous use. It is the second worst AR stock to buy according to short sellers as we covered in our intro. MicroVision, Inc. (NASDAQ:MVIS)’s financial position is far from stellar. The firm $96.7 million in trailing twelve month operating expenses are quite high, then its latest cash and equivalents of $56.8 million. This means that MicroVision, Inc. (NASDAQ:MVIS) might have to raise debt in the future, which will impact its profits. Or, the firm might issue equity which can dilute the value for existing shareholders. However, MicroVision, Inc. (NASDAQ:MVIS) does benefit from a leading edge product portfolio. Its lidar systems are at the top of the pack with a point score of 14 million points per second, and with competitors operating on older nodes such as 1550 nanometers or 905 nanometers. Yet, 90% of MicroVision, Inc. (NASDAQ:MVIS)’s revenue came from two customers as of H1 2024, with one accounting for 58% of the sales. This exposes the stock to significant headwinds if MicroVision, Inc. (NASDAQ:MVIS) faces a setback and a customer switches suppliers.
MicroVision, Inc. (NASDAQ:MVIS)’s management shared important details for potential customer diversification in the Q2 2024 earnings call:
“We remain engaged in seven RFQs with automotive OEM for passenger vehicles. MAVIN and MOVIA S are engaged in all conversations. The pace for reviews and decisions remain with the OEMs. Startup production for these high volume programs are targeted towards the end of this decade, so decisions are pushing out into later this year.
We are cautiously optimistic about these targets to decisions, but remain aggressively engaged. A new era of engagement has opened up with multiple OEMs across Europe and U.S. OEMs are engaging with us to investigate the opportunity for a more strategic hardware and software exploration in developing a more customized MAVIN and MOVIA S design for L2 products. We are actively working on this as it represents near-term revenue opportunities as well as delivering a more custom sensor for their B-sample needs for RFQs. We are working on exploring integration of MAVIN behind windshield as well as a new 180 degree field of view MOVIA S sensor that would integrate into a car body with small bumps resembling the current camera module bumps. These are exciting opportunities and I see them as potentially a faster path to RFQ decisions.”
5. Aeva Technologies, Inc. (NYSE:AEVA)
Number of Hedge Fund Holders In Q2 2024: 8
Aeva Technologies, Inc. (NYSE:AEVA) is a California based firm that sells lidar products for cars, trucks, industrial uses, and other products. Its shares shot up by 31% in March when the Q4 2023 earnings report revealed that the firm had signed a $1 billion order with Daimler as its exclusive lidar supplier. However, Aeva Technologies, Inc. (NYSE:AEVA)’s shares are down by 57% since then as not only did it complete a reverse split to regain NYSE compliance but its cash reserves in Q1 failed to impress. Aeva Technologies, Inc. (NYSE:AEVA)’s operating expenses during the first quarter were $35.9 million and they jumped to $36.5 million in Q2. At the end of the two respective quarters, its cash and equivalents were $189 million and $160 million, implying that the firm had roughly one year of cash to fund operations. Analysts expect Aeva Technologies, Inc. (NYSE:AEVA)’s revenue to sit at $8.8 million in 2024 and $21 million in 2025, which increases the possibility of either more debt to further push profitability in the future or additional share issuance to dilute equity.
Aeva Technologies, Inc. (NYSE:AEVA)’s management is optimistic about its order wins though. Here’s what it shared during the Q2 2024 earnings call:
“In automotive, we have made significant progress on opportunities with multiple global top 10 passenger vehicle OEMs. With one top passenger OEM, we continue to expect the award decision later this year. And with another top passenger OEM, we began a new collaboration around 4D LiDAR vehicle integration. In Industrial, we completed the final validation of our LiDAR-on-Chip in Nikon’s product ahead of our first Industrial launch in Q4 of this year. And lastly, Aeva continued to broaden the reach of 4D LiDAR with our expansion into security. We are proud that a top U.S. National Defense Security organization selected Aeva 4D LiDAR as a primary detection sensor to help protect some of the nation’s critical energy infrastructure.”
4. 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.”
3. Ouster, Inc. (NYSE:OUST)
Number of Hedge Fund Holders In Q2 2024: 15
Ouster, Inc. (NYSE:OUST) is a diversified California based lidar company that also targets the industrial, robotics, and infrastructure sectors along with automotive. This is quite important since it means that the firm has a wider moat when compared to pure play automotive lidar firms, and is also reflected in the share price. Ouster, Inc. (NYSE:OUST)’s recent share price of $6.66 makes it one of the few non penny lidar stocks on our list. The firm has been delivering well on the financial front lately. Its Q2 revenue marked a 39.3% annual growth as Ouster, Inc. (NYSE:OUST) posted $26.9 million in the segment. It has had a busy 2024 so far by having signed a deal with a robotics company that provides it with ground presence and by having acquired certification for use in traffic lights. These use cases are key for firms like Ouster, Inc. (NYSE:OUST) as they provide them with ample opportunities for diversification that can help stem any auto related lidar downturns.
Ouster, Inc. (NYSE:OUST)’s management is also focusing on the software side of the lidar business, which creates room for a high margin, recurring revenue division. Here’s what they shared during the Q2 2024 earnings call:
“Our first priority is to expand software sales and grow our installed base. In the second quarter, we secure deals to supply Ouster Gemini, our smart infrastructure software solution to one of the world’s largest consumer technology companies, as well as a global telecommunications company. During the quarter, our software team also improved movement detection for security customers, optimized software processing requirements, and enhanced our deep learning perception model to support new use cases, which is identifying unauthorized individuals tailgating into restricted areas. The second quarter also marked one of our best quarters for software attached sales. We increased our deployments at distribution yards as Gemini and REV7 are helping drive the immediate ROI for our customers, in addition to providing safety and operational optimization.”
2. indie Semiconductor, Inc. (NASDAQ:INDI)
Number of Hedge Fund Holders In Q2 2024: 16
indie Semiconductor, Inc. (NASDAQ:INDI) is a diversified sensor company that sells cameras, radar sensors, and lidar sensors. The fact that it sells both cameras and lidars is good since it means that the firm can pivot from lidars to cameras if the broader industry follows Elon Musk and shifts to cameras. However, like other lidar firms, indie Semiconductor, Inc. (NASDAQ:INDI) is yet to generate a profit. The firm’s trailing twelve month operating expenses are $241 million, and its cash and cash equivalents as of Q2 are $112 million. Naturally, this also makes it unsurprising that indie Semiconductor, Inc. (NASDAQ:INDI)’s stock is down 48.4% year to date. This has come on the back of several worrying developments, including news that indie Semiconductor, Inc. (NASDAQ:INDI)’s top management is taking a token base salary of $1. This creates doubts about the firm’s ability to fund its operations in the future. On the sales front, the firm’s revenue was flat during Q2.
One key factor that has hampered indie Semiconductor, Inc. (NASDAQ:INDI) is excess inventory. Here’s what management shared during the Q2 2024 earnings call:
“Additionally, given lower consumer pricing specials for vehicle purchases and reduced global electric vehicle stimulus programs, automotive OEMs have been prioritizing de-featured vehicles, which has led to reduced semiconductor content. These factors, coupled with ongoing inventory consumption which persisted in the second quarter, negatively impacted our revenue against our prior outlook. We now anticipate this trend will spill over into the second-half of 2024, as reflected in most recent analyst estimates, which project essentially flat to low single-digit negative growth for the automotive semiconductor industry in 2024. Despite these headwinds, we believe that with our new product launches and current customer status, indie is poised to deliver modest growth in the third quarter, growing above the market to reach outsized growth levels as we move through the second-half of 2024 and into 2025.”
1. Allegro MicroSystems, Inc. (NASDAQ:ALGM)
Number of Hedge Fund Holders In Q2 2024: 21
Allegro MicroSystems, Inc. (NASDAQ:ALGM) is a semiconductor fabrication company that makes lidar systems. Its ability to manufacture the systems that it sells provides the firm with cost advantages by enabling it to reduce end product prices. Allegro MicroSystems, Inc. (NASDAQ:ALGM) has significant exposure to the automotive industry, with $131 million of its $167 million revenue during Q2 2024 having come from the sector. This exposure also means that Allegro MicroSystems, Inc. (NASDAQ:ALGM) is suffering from the same industry slowdown as other automotive suppliers particularly as traditional car manufacturers struggle with strikes and focus on older models while EVs struggle to sell. The slowdown made Allegro MicroSystems, Inc. (NASDAQ:ALGM)’s revenue drop by 39.9% annually in Q2. However, as the firm generates a sizeable chunk of its revenue (69%) from magnetic sensors, once the industry normalizes, it could see an uptick in performance. Additionally, Allegro MicroSystems, Inc. (NASDAQ:ALGM) industry partnerships through its magnetic sensors could also let it land lidar deals.
Allegro MicroSystems, Inc. (NASDAQ:ALGM)’s management continues to focus on inventory management. Here’s what it shared during the Q2 2024 earnings call:
“So I would categorize our progress on inventory is as expected. Okay. And as we highlighted in our last, first quarter or the last earnings call, we think on average within the automotive channel, which is largely derived through tiers and contract manufacturers, inventories have come down roughly four weeks. Now some tiers and contract manufacturers are ahead of that somewhere, obviously behind. And I would say that every customer, every partner has deferring goals. But I would say broadly, we’ve made substantial progress in bringing inventories down. Within the industrial business which is largely sold through distribution. I would say it’s more of what regional lens, where some of the regions would stay with slightly higher level, which is what is typical, for example, in Japan.
But in places like China, in North America, we’ve made some substantial progress in bringing the inventory down. So overall, I would say I’m really pleased with the progress that’s been made. As you remember, we intentionally under shipped in Q1, with the aim of helping our distributor partners and our channel partners and tiers really worked down their inventory very aggressively. And so we think that that’s largely done. Some of this is going to, as I said in my prepared remarks, we’ll continue to see due to obviously, but we believe that we’ve made substantial progress here from the inventory balancing.”
ALGM is a strong lidar stock as per hedge funds. But 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 ALGM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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