Autonomous Trucking And FMCW LiDAR Adoption Will Drive Long Term Opportunity

Catalysts

About Aeva Technologies

Aeva Technologies develops frequency modulated continuous wave LiDAR and unified perception solutions for automotive, trucking and industrial automation markets.

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

• Impending series production award with a top 10 global passenger OEM for Level 3 highway and city driving positions Aeva as an early standard in next generation driver assistance, creating multi-year, high volume revenue visibility and operating leverage on fixed R&D expenses, which should support margin expansion and earnings growth.
• Exclusive long range LiDAR supplier status on Daimler Truck's autonomous program, with vehicle fleet expansion through 2026 and planned 2027 market entry, ties Aeva directly to the adoption of autonomous freight, supporting a rising, contracted revenue base and improving cash flow predictability as volumes ramp.
• Rapid traction of Eve 1D and 1V sensors in manufacturing automation, supported by a Thailand production line already shipping, enables Aeva to tap into a multibillion dollar precision sensing market, diversifying revenue away from cyclical auto programs and improving gross margin mix over time.
• Chip based FMCW architecture and partnerships with Fabrinet and LG Innotek allow highly automated, capital light scaling just as demand for higher resolution sensing accelerates in vehicles and factories. This limits incremental CapEx and supports better net margins as unit volumes increase.
• Strengthened liquidity of roughly $270 million, including Apollo convertible notes and the LG Innotek investment, gives Aeva runway to bridge from low current revenue to anticipated production ramps. This reduces financing risk and supports sustained investment in commercialization that can accelerate future revenue and earnings inflection.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Aeva Technologies's revenue will grow by 133.1% annually over the next 3 years.
• 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 $16.8 million (and earnings per share of $0.23) by about December 2028, up from $-156.3 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 134.6x on those 2028 earnings, up from -5.3x today. This future PE is greater than the current PE for the US Electronic industry at 24.9x.
• 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 8.41%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long design cycles and late stage but still unsigned series production contract with the top 10 global passenger OEM mean any delay, scope reduction or loss of this platform win could materially push out the timing and scale of expected LiDAR adoption in Level 3 passenger vehicles. This could limit future revenue growth and delay operating leverage on research and development expenses, which would weigh on earnings.
• The autonomous trucking and Level 4 freight market, including Daimler Truck and Torc, is still emerging and capital intensive. Any slowdown in industry wide autonomy investment, regulatory delays or changes in Daimler or Torc funding priorities could defer the 2027 commercialization time line, depress expected sensor shipment volumes, constrain revenue and keep net margins deeply negative for longer.
• Precision sensing and manufacturing automation represent a large multibillion dollar secular growth opportunity, but Aeva is early in this market with only initial thousand unit orders. Stronger incumbent competition, slower than expected customer qualification cycles or price pressure from larger suppliers could limit share gains, leading to lower than anticipated diversification of revenue and a less favorable gross margin mix.
• The move from time of flight LiDAR to FMCW as a new industry standard is not yet proven at scale and depends on OEMs broadly following the first passenger win. If alternative sensing stacks based on cameras, radar or competing LiDAR architectures remain sufficient for Level 2 plus and Level 3 applications, Aeva may struggle to convert its growing request for information and request for quote pipeline into large production programs, which could constrain long term revenue and profit margin expansion.

Valuation

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

• The analysts have a consensus price target of $24.11 for Aeva Technologies based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• 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 analysts, you'd need to believe that by 2028, revenues will be $192.0 million, earnings will come to $16.8 million, and it would be trading on a PE ratio of 134.6x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $13.9, the analyst price target of $24.11 is 42.3% 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.