Autonomous Truck And OEM Adoption Will Drive Strong Long-Term Opportunity

Catalysts

About Aeva Technologies

Aeva Technologies develops FMCW based 4D LiDAR and unified perception platforms for automotive autonomy and industrial precision sensing.

What are the underlying business or industry changes driving this perspective?

• Imminent series production award with a top 10 global passenger OEM for Level 3 highway and city driving positions Aeva as a reference supplier for next generation autonomy, which can drive rapid revenue inflection as volumes scale across multiple vehicle lines.
• Exclusive long range and ultra long range LiDAR role in Daimler Truck's autonomous production program, with clear visibility to 2027 commercialization, provides a line of sight to high margin, recurring sensor shipments as autonomous freight adoption accelerates.
• Early success in precision sensing with Eve 1D and 1V, serving a multibillion dollar manufacturing automation market through leading partners like SICK and LMI, creates a faster ramping, higher ASP industrial revenue stream that can diversify and lift overall gross margins.
• Chip based FMCW architecture and outsourced manufacturing with Fabrinet and LG Innotek enable high volume, automated production without heavy CapEx, supporting operating leverage and improving net margins as sensor volumes grow across automotive and industrial customers.
• Strengthened liquidity of roughly $270 million, including the Apollo convertible notes and LG Innotek investment, allows Aeva to fund program ramps and pursue additional OEM wins without balance sheet strain, supporting sustained earnings growth as the order pipeline converts.

Assumptions

This narrative explores a more optimistic perspective on Aeva Technologies compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Aeva Technologies's revenue will grow by 111.3% annually over the next 3 years.
• The bullish analysts are not forecasting that Aeva Technologies will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Aeva Technologies's profit margin will increase from -1031.1% to the average US Electronic industry of 8.8% in 3 years.
• If Aeva Technologies's profit margin were to converge on the industry average, you could expect earnings to reach $12.5 million (and earnings per share of $0.17) by about December 2028, up from $-156.3 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 247.3x on those 2028 earnings, up from -5.8x today. This future PE is greater than the current PE for the US Electronic industry at 24.6x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.42%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Commercial adoption of Aeva's technology by key automotive partners such as the top 10 passenger OEM and Daimler Truck could be delayed or fall short of expectations, which would slow the transition from low single digit millions of quarterly revenue to meaningful series production scale and constrain long term revenue growth and earnings.
• The broader market for autonomous driving and advanced driver assistance systems may evolve more slowly than anticipated, with regulatory, safety, or consumer acceptance hurdles limiting rollout of Level 3 and Level 4 programs. This could push out the ramp of high volume sensor shipments and delay improvement in net margins and overall earnings.
• Manufacturing scale up with partners like LG Innotek and Fabrinet, including the new Eve production line in Thailand, may encounter quality, yield, or supply chain challenges. These challenges could increase unit costs, compress gross margins and delay revenue recognition from both automotive and precision sensing customers.
• The multibillion dollar precision sensing and manufacturing automation market may prove more competitive than expected, with incumbents like SICK and LMI or alternative technologies retaining share and limiting Aeva's ability to convert early 1,000 plus unit orders into sustained, high volume programs. This could cap diversification benefits and keep overall company revenue and margins below bullish expectations.
• High cash use and reliance on external financing such as the recently issued convertible notes, combined with a still substantial non GAAP operating loss, increase the risk that future dilution or less favorable funding will be required if revenue ramps slower than planned. This would pressure per share earnings and may limit valuation expansion even if top line continues to grow.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Aeva Technologies is $33.0, which represents up to two standard deviations above the consensus price target of $24.11. This valuation is based on what can be assumed as the expectations of Aeva Technologies's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $33.0, and the most bearish reporting a price target of just $18.55.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $143.0 million, earnings will come to $12.5 million, and it would be trading on a PE ratio of 247.3x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $15.16, the analyst price target of $33.0 is 54.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.