It has been a banner year for stocks of companies that want to disrupt the automotive industry, and Luminar Technologies (NASDAQ:LAZR) is the latest to ride the wave.
Luminar is a maker of lidar, a technology that uses pulsed laser beams to measure distances that are used in most self-driving concepts. The company went public on Dec. 3 through a reverse merger and the stock almost immediately doubled in value.
Investors are excited about the potential of the technology to help make robocars a reality. Alas the lidar market is getting somewhat crowded, and Luminar has a lot to prove in the quarters ahead to justify those sorts of gains.
The potential is real, but the markets are getting way ahead of themselves in terms of the valuation. Here’s why three Fools believe General Motors (NYSE:GM), Velodyne Lidar (NASDAQ:VLDR), and XPeng (NYSE:XPEV) are better buys today.
Image source: Getty Images.
This old guard company will survive, and thrive, post-revolution
Lou Whiteman (General Motors): General Motors typically plays the role of the dinosaur in discussions about the future of the automobile, stuck in its old ways and doomed as change comes. In reality, CEO Mary Barra has positioned the company to be one of the big winners in a self-driving world.
GM owns a majority stake in Cruise, a self-driving start-up that has combined its software expertise with GM hardware to create a formidable challenger to Alphabet‘s Waymo unit. Cruise has a modified Chevy Bolt it has converted into a self-driving taxi. As the tech matures, GM’s manufacturing prowess should ensure that Cruise-enabled vehicles hit the roads in large numbers.
That day could come sooner than you think: Cruise said Dec. 9 it has recently started testing self-driving vehicles without driver monitors in San Francisco.
The bottom line is that while competing systems from Tesla (NASDAQ:TSLA) and others tend to get more hype than Cruise, General Motors is positioned to not just be a survivor in a world of robotaxis, but potentially to win the race to get there.
Couple the self-driving tech with GM’s massive investment into electrification, and I’d argue the best way to invest in the future of the automobile is by buying one of the industry’s most storied names from the past.
Luminar is intriguing, but this is a better lidar stock
John Rosevear (Velodyne Lidar): I won’t argue with anyone who thinks that Luminar has intriguing technology and is worth a flyer. But I think even within the tiny-but-suddenly less-tiny world of lidar stocks, Velodyne is a better stock to consider, for two big reasons: First, its technology is extremely competitive, and second — and crucially — it’s already doing business with most of the world’s automakers.
It’s easy to miss, but that’s a huge advantage. Start-up carmakers get a lot of hype, but the reality is that the existing big global automakers will be building the majority of tomorrow’s self-driving vehicles. Another reality: Big automakers favor suppliers they know and trust.
Even though lidar is still an emerging technology in autos, Velodyne has already earned that trust. The company has proven that it can deliver automotive-grade products on time and on budget, over and over. No other lidar maker (including Luminar) can say that yet.
This Argo AI self-driving prototype has two of Velodyne’s “hockey puck” lidar sensors at the top of its sensor array. Argo AI, which is closely affiliated with Ford and counts Volkswagen among its investors, is one of the many companies in the self-driving space that already use and trust Velodyne’s lidar sensors. Image source: Ford Motor Company.
Not only does Velodyne already count most of the world’s big automakers as clients, its distinctive “hockey puck” sensors can be seen on the prototype self-driving vehicles from many of the other companies aiming to enter the self-driving space as well — and they’re finding more and more customers in other industries (like robotics), too.
In fact, both Ford Motor Company (NYSE:F) and Chinese search-engine giant Baidu invested in Velodyne way back in 2016. Both still hold sizable stakes today, and of course both are among Velodyne’s larger customers.
Velodyne’s stock isn’t cheap, of course. But if you’d like to invest in a self-driving future with a nice side of robotics, this is a company that deserves your close attention.
Don’t invest in car parts. Invest in cars.
Rich Smith (XPeng): Company A makes car parts, had no revenues last year (but is expected to make maybe $15 million this year), and costs $12 billion. Company B makes entire, functioning electric cars, sold $333 million worth of them last year, and will probably grow that by nearly 150% this year (according to estimates from S&P Global Market Intelligence).
Given the choice, which of these automotive businesses would you invest in? Here’s a hint: Company A is Luminar, and Company B is Chinese automaker XPeng.
Valued at $34 billion, XPeng is nearly three times the cost of Luminar by market capitalization. And yet, paying that price buys you a much bigger, and already much more successful business. Believe it or not, even though Luminar is the more recent IPO, XPeng stock is actually the faster-growing stock. After the 150% sales growth that’s projected for this year, analysts forecast that XPeng will grow its sales even faster next year — 166%. That’s as compared to Luminar, whose sales growth is expected to be only 73% in 2021.
Don’t get me wrong — 73% year-over-year sales growth is fan-tas-tic. But it’s still only half as fast as XPeng. What’s more, if you like Luminar stock as a play on lidar in autonomous driving systems, well, XPeng gives you that, too. Just last month, XPeng announced that in 2021 it will become the first company in the world to integrate lidar into production model cars for sale. In contrast, Luminar’s not expected to be selling its lidar systems at scale until Volvo starts ramping up electric production in 2022.
Long story short, even if you think “lidar is the future,” XPeng is a better way than Luminar to invest in that future.