By Sam Boughedda
A JPMorgan analyst told investors in a research note that the firm is initiating coverage of LiDAR stocks ahead of a strong L3 ramp.
Shares of Innoviz Technologies (NASDAQ:INVZ) ($22 price target) and Luminar Technologies (NASDAQ:LAZR) ($30 price target) were set at Overweight, with Cepton Inc (NASDAQ:CPTN) rated Neutral, and Velodyne Lidar Inc (NASDAQ:VLDR) rated Underweight.
JPMorgan is initiating coverage on the LiDAR industry and the four companies in the technology segment with a "positive view" of the revenue opportunities in multiple end-markets.
"Even as most of the leading LiDAR companies are focused on the automotive market, as the Automotive TAM overwhelms any other, we see the technology well equipped to serve a broad range of Industrial Technology applications outside of automotive, with the concentration of revenue to the automotive market more a function of resource allocation decisions taken by a group of companies that are yet to scale, or generate cash and have to be mindful of navigating a tough macro landscape," wrote the analyst.
The analyst said the firm believes the debate around the value-add of LiDAR in a sensing suite has "been long settled," with decisions to exclude LiDARs primarily a "cost-based decision" rather than performance.
"We estimate the Automotive TAM is about $110 bn, with the initial ramp driven by L2 functionalities, followed by ramp of L3+ in the second half of this decade and exiting 2030. We believe the true differentiation remains in a high performance forward facing LiDAR capable of handling both L2 ADAS as well as L3+ highway autonomy allowing automakers to prioritize safety with ADAS while selling a premium option in L3 highway driving, which we see Luminar and Innoviz supporting comfortably," he added.