Luminar vs. Velodyne: Which Autonomous Driving Stock is a Better Buy?

With the rapid development of light detection and ranging (LiDAR) technology, the automotive industry is becoming closer to releasing next-generation self-driving vehicles. LiDAR utilizes fast laser pulses to create a three-dimensional visual image. The LiDAR system enables autonomous vehicles to collect information about a vehicle's surroundings, thus taking over from the driver. 

Besides, the global autonomous cars market is estimated to reach $64.88 billion by 2026, growing at a CAGR of 22.7% during the forecast period, Facts & Factors report. So, companies from the given industry should benefit in forthcoming years. 

Therefore, today I’ll analyze and compare two autonomous driving stocks: Luminar Technologies, Inc. (LAZR) and Velodyne Lidar, Inc. (VLDR). Founded in 2012, Luminar Technologies develops and sells lidar sensors and other software solutions related to autonomous vehicles. Velodyne Lidar is a California-based technology company that produces a real-time three-dimensional vision for autonomous systems.

Over the past six months,‌ ‌LAZR stock‌ ‌has decreased about 27%,‌ ‌outperforming its rival‌ ‌VLDR,‌ ‌which‌ dropped around 54%‌ ‌over‌ ‌the‌ ‌same‌ ‌period.‌ ‌ 

Recent Developments 

On January 20th, Luminar announced that it had partnered up with Mercedes-Benz to speed up the development of autonomous technologies for Mercedes’ vehicles. Luminar’s Iris LiDAR sensors should enhance vehicle safety and autonomous driving capabilities. This partnership is a significant milestone for the company as it continues to move in the direction of series production. As a result, shares of Luminar soared 13% following the announcement.

On January 11th, Velodyne Lidar revealed that it had signed a five-year sales agreement for its LiDAR technology with QinetiQ Inc. Velodyne’s sensors that provide mapping and autonomy capabilities should strengthen QinetiQ's unmanned ground vehicles. This announcement added bullish momentum to VLDR, pushing its shares over 4% during the pre-market trading session. 

Financial Overview & Analysts Estimates

Luminar Technologies last issued its earnings report on Thursday, November 11th. In Q3, the company’s revenue increased by 89.1% year-over-year to $7.98 million, driven by increased sales from its Autonomy Solutions segment. However, LAZR slightly missed Wall Street estimates by $0.92 million.

Although Luminar's net loss grew 64% year-over-year to $51.34 million, its Non-GAAP EPS was ($0.10), in line with analysts’ consensus. Besides, LAZR maintained its FY2021 guidance, planning to recognize revenue in the range between $30 and $33 million. 

For the fourth quarter, Wall Street expects Luminar's EPS to grow 5.85% year-over-year to ($0.11). Moreover, its revenues should lift 384.35% to $11.78 million in the current quarter.

In the third quarter of 2021, Velodyne Lidar's revenue decreased 59.3% on a year-over-year basis, coming in at $13.06 million. This decrease was due to the absence of a non-recurring stocking fee and a lower average selling price in Q3. Not unexpectedly, the company missed the revenue consensus by $7.7 million. Its Non-GAAP EPS stood at ($0.19), missing estimates by $0.04.

The company delivered 4,400 LiDAR sensors during the third quarter. Velodyne ended the quarter with cash, cash equivalents, and short-term investments of $324.5 million. So, its liquidity position remained strong, considering a nine-month cash burn rate of $90.24 million. 

For the next quarter, analysts expect VLDR's bottom line to decelerate 45.47% YoY, standing at ($0.17) per share. Furthermore, analysts forecast that its 4Q2021 revenue will remain flat YoY at $17.84 million. 

Comparing Options Market Sentiment

Looking at the March 18th, 2022 option chain for both LAZR and VLDR, we can determine options market sentiment by analyzing the calls/puts ratio. In LAZR's case, the open calls/open puts ratio at the $15.00 strike price comes in at 1.48x, implying a bullish options market sentiment. When it comes to VLDR, the open calls/open puts ratio at the $5.00 strike price is 1.26x, indicating a relatively weaker bullish options market sentiment.  

Conclusion

I believe LAZR is currently a better investment than VLDR. LAZR's partnership with Mercedes-Benz could potentially bring a lot of long-term benefits, thus improving its operating metrics. Furthermore, the company has better financials, forward growth rates, and options market sentiment. 

LAZR shares fell $0.40 (-3.14%) in premarket trading Tuesday. Year-to-date, LAZR has declined -26.67%, versus a -8.75% rise in the benchmark S&P 500 index during the same period.

Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.

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