We recently published a list of 11 Best Lidar Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Ouster, Inc. (NASDAQ:OUST) stands against other best Lidar stocks to buy according to hedge funds.
The United Nations reports that approximately 1.35 million people die on the road annually, often due to human error. Despite various safety measures, accidents persist, driving the push for self-driving cars. These vehicles use Lidar (Light Detection and Ranging) technology to emit laser pulses, creating a 3D map of their surroundings in microseconds, allowing faster reaction times than human drivers.
According to S. N. Jha, the Principal Consultant at Fact.MR, Lidar sensors are very accurate, a fact that is driving the popularity of AVs. He writes: “Lidar sensors have been proven accurate in various autonomous driving technologies and, subsequently, are deployed in the automotive industry. Moreover, increasing expenditures in the development of numerous autonomous driving technologies are projected to stimulate the demand for Lidar sensors and scanners in multiple automotive applications in the coming 10 years.”
And there is plenty of evidence backing Jha’s assertions. Markets and Markets valued the Lidar market at $1.4 billion in 2023 and estimated that it would expand at an 18.2% CAGR between 2023 and 2029.
However, it is possible that the estimates are hugely conservative or do not expand their focus beyond autonomous cars. In recent years, some companies have developed concepts of autonomous drones and robots for use in logistics. Their goal is to get goods, especially in an e-commerce setting, from point A to B without a human in control. Besides reduced accidents, the “autonomous-ization” of logistics could lower operational costs for e-commerce companies, increase efficiency, and help them contribute positively to the battle against global warming.
ARK Invest estimates that companies in the autonomous logistics space could generate as high as $80 billion in revenue by 2026. This value may multiply exponentially to $920 billion by 2030. With all these different applications for Lidar technology cropping up, it is possible that no one is capable of doing justice to the potential of the Lidar market. We haven’t yet touched on how the increasing adoption of artificial intelligence (AI) is likely to boost demand for lidar technology. For instance, AI and large language models (LLMs) improve the processing and analysis of Lidar data, increasing the technology’s accuracy and safety.
Our Methodology
To compile our list of the best Lidar stocks to buy, we first researched extensively to identify companies with significant exposure to LiDAR technology. We defined exposure in terms of manufacturing Lidar products or components, developing Lidar-related solutions, or integrating Lidar tech into other products. We then analyzed these companies based on their hedge fund holdings in Q3 2024. The finalists are stocks with the most hedge fund interest.
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 group of robotic vehicles navigating a terrain autonomously utilizing the company’s 3D vision technology.
Ouster, Inc. (NASDAQ:OUST)
Number of Hedge Fund Holders: 13
Ouster, Inc. (NASDAQ:OUST) is one of the largest American companies that comes as close as possible to a pure-play LiDAR company. It develops and manufactures high-performance LiDAR sensors for several sectors, mostly automotive.
According to CEO Angus Pacala, the company reported record results in Q3 2024, thanks to the increased adoption of the REV7 sensors. Revenue increased by 26% year over year to $28 million, and the non-GAAP gross margin was 45%, compared to 33% in Q3 2023. Adjusted EBITDA loss also improved to $10 million from $18 million a year ago. More than 3,900 sensors were shipped during the quarter.
However, it appears that the company has yet to show what it can do in terms of revenue generated. In mid-January, Ouster, Inc. (NASDAQ:OUST) won a $2 million contract to deploy its traffic management solution in Chattanooga, Tennessee. A successful pilot has already been undertaken, and BlueCity, the traffic management solution, will now be installed across 120 intersections.
And the customer is already loving it. Chattanooga Mayor Tim Kelly commented on the project, saying:
“Using American lidar and advanced perception software from Ouster, we are building the largest lidar-powered smart traffic network in the United States. This technology will enable optimized traffic signal management on roads and intersections to improve traffic flow and provide data we can use to improve pedestrian safety.”
Ouster, Inc. (NASDAQ:OUST) can and will try to sell this technology to more cities across the country. If this happens, the company faces a horizon with unlimited revenue potential. This might also explain why the stock has been on a roll over the past year, gaining 81.47% in the past 12 months. Northland Capital Markets initiated coverage of Ouster shares with an “Outperform” rating. The target price is $10.96 per share—the current price (February 13) is just $1 shy of this target.
Overall, OUST ranks 5th on our list of best Lidar stocks to buy according to hedge funds. While we acknowledge the potential of OUST as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than OUST 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.
