On Tuesday morning, JP Morgan analyst Samik Chatterjee and his team of analysts that cover the Networking & Hardware sector published a multi-stock initiation of four companies in the LiDAR industry.
The team has a positive view on the revenue opportunities in multiple end-markets for the LiDAR (light detection and ranging) industry.
The firm notes that the leading LiDAR companies remain focused on the automotive industry, the largest addressable target market, but they see the technology as being “well equipped to serve a broad range of Industrial tech applications” in other industries.
The automotive sector for LiDAR is forecast to exceed $100 billion by 2030, with the most significant part ramping up from 2025-2030.
The analysts note that while there will be some time before the industry produces meaningful revenue from fully autonomous technology, near term companies focused on simpler technology called Level 2 Autonomy, are scaling faster.
JP Morgan recommends investors spread stock picks across the sector using a barbell approach.
The analysts initiated Cepton (US:CPTN) as neutral., Velodyne (US:VLDR) at underweight. And Luminar (US:LAZR) and Innoviz (US:INVZ) at overweight.
The company is the leading developer of Level 3+ LiDAR applications.
Chatterjee expects Luminar to emerge as the strongest revenue generator and largest pure-play LiDAR supplier despite its current growth rate.
They also expect LAZR will be the only company that won’t require additional incremental capital.
LAZR is the 257th most popular stock among Fintel retail investors who have linked their portfolios for free. The stock has risen 22 ranks this week in retail trading activity.
The firm expects a strong revenue scale up in the second half of this decade, which will be led by the stock’s industry-leading order book size, which is currently over $6.6 billion.
JPMorgan highlighted how a Volkswagen deal win largely helped the guidance of $3.3 billion in revenue in 2030.
The firm notes that the price target forecast incorporates the potential requirement for near-term capital to navigate tough macroeconomic seas.
Fintel’s momentum score is bullish on INVZ as the share price has risen 56% over the last six months, recovering from a 2021 sell-off post-SPAC merger listing.
JP Morgan initiated Cepton with a neutral recommendation as the firm is focused on adopting ADAS functionalities that will use Level 3 LiDAR applications.
As the Level 3 technology is more costly and not fully applied yet in the industry, the firm remains cautious about the sustainability of growth as these L3 applications become more prominent over this decade.
They expect the company may require near-term capital as they ramp up scalability into the decade.
The firm initiated coverage with a negative ‘underweight ‘rating as the firm is “right-sizing” its operations to meet the limited success it has had from wins with auto OEMs to date.
The firm is negative on the prospect of 2030 future revenues below its peers and it expects Velodyne will be the laggard while still being a leader in the future of Industrial LiDAR markets.
This article originally appeared on Fintel
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