Lidar sensors are seen on the roof of a Toyota concept car.
David McNew/AFP via Getty ImagesWall Street is warming up to stocks of new lidar companies providing technology that most car companies consider critical to self-driving vehicles.
Wednesday, Citigroup analyst Itay Michaeli launched coverage of the lidar company Ouster with a Buy rating and a target of $17 for the stock price. His recommendation comes as a growing chorus of analysts call for investors to look at the entire lidar industry.
The Buy has Ouster stock (ticker: OUST) on the move. Shares were up 22% at $9.59 in early trading, while the S&P 500 and Dow Jones Industrial Average were flat.
Lidar is short for laser-based radar. Sensors that use the technology can see at night and through fog, as well as in other driving conditions that can blind radar and optical cameras.
Most auto makers are using lidar sensors as they work to develop self-driving cars. And robotaxi fleets in operation today, such as Waymo’s One, are equipped with lidar sensors. Data from the sensors feeds software that helps control the vehicles.
With “lidar…stocks, we think there are three calls one needs to get right,” wrote Michaeli in a Wednesday report. The degree to which lidar is used within the overall automotive market is one key factor affecting all lidar stocks. Michaeli also wants individual lidar companies to have sales opportunities outside traditional automotive markets, as well as solid software options.
For lidar, Michaeli has an “above consensus view” of the technology’s potential. He points to Tesla’s (TSLA) effort to develop full self-driving technology, as well as a potential car offering from Apple (AAPL), as accelerating the pace of change in the industry. Both companies’ moves will drive other car companies to innovate faster, helping lidar adoption.
Michaeli said he is encouraged that Ouster has hundreds of nonautomotive customers. He called its technology architecture “unique and respected within the industry.”
Unique architecture is a difficult term to define, but the various lidar companies use different wavelengths of laser light. How the light is emitted is another point of differentiation for companies.
Overall, Ouster checks all of Michaeli’s three boxes for lidar stocks. His price target is more than 100% above the shares’ recent level.
Wednesday’s call is Ouster’s second stock rating from the Street. Craig-Hallum analyst Richard Shannon also rates the shares at Buy, with a target of $25.
Most of the pure-play lidar companies are new, so Wall Street is just ramping up coverage. Luminar Technologies (LAZR), the most valuable of the recent lidar startups, has six ratings: four Buys, and two Holds. Velodyne Lidar (VLDR) has seven, with five Buys and two Holds. AEVA Technologies (AEVA) has five ratings, all of them at Buy. Innoviz (INVZ), which went public via a merger with a special-purpose acquisition company this week, has no ratings yet.
Overall, there are about 20 ratings for lidar companies, and 16, or 80%, are at Buy. The average Buy-rating ratio for stocks in the Dow is about 60%.
Wall Street likes lidar.
Write to Al Root at allen.root@dowjones.com
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April 07, 2021 at 09:09PM
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