Geopolitical Tensions And Cost Pressures Will Erode LIDAR Viability

Key Takeaways

• Heavy reliance on a few OEM partners and supply chain risks in unstable regions could disrupt growth and cause volatile revenue performance.
  
• Slow autonomous vehicle adoption, high cash burn, and LIDAR commoditization threaten profitability and long-term market relevance.
  
• Diversification into nonautomotive sectors, strong industry partnerships, and operational efficiencies position the company for sustained growth, improved profitability, and reduced financial volatility.

Catalysts

Manufactures and sells automotive grade LiDAR sensors and perception software to enable safe autonomous driving at a mass scale.

• Despite the recent surge in revenue and optimism around multi-year automotive OEM partnerships, Innoviz remains highly vulnerable to disruptions in key supply chain regions such as East Asia, where ongoing geopolitical instability may delay production ramps, raise component costs, and ultimately compress the company's gross margins during the most critical period of its anticipated revenue inflection.
  
• Slower-than-expected real-world adoption of fully autonomous vehicles-driven by persistent regulatory barriers, unresolved safety and liability concerns, and a lack of clear timelines for Level 3 and Level 4 mass deployment-may sharply limit the total addressable market for LIDAR, putting at risk Innoviz's ability to achieve or sustain high revenue growth targets through the next several years.
  
• Sustained operating losses and a structurally high cash burn, despite recent improvements, create a continued need for dilutive capital raises such as the recently announced $75 million at-the-market program, risking long-term dilution and diminished earnings per share as funding requirements outpace incoming cash flow from customer contracts.
  
• The company's future revenue streams remain exposed to high customer concentration with only a handful of high-profile OEMs, meaning any contract delay, scale-back, or loss could cause severe swings in top-line results and render year-over-year revenue guidance unreliable.
  
• Intensifying industry commoditization of LIDAR hardware and increased viability of alternative sensor technologies threaten to erode pricing power, stunt margin expansion from scale manufacturing, and potentially render Innoviz's advanced solutions obsolete just as mass production is set to ramp, undermining long-term profitability and gross margin improvement.

Innoviz Technologies Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Innoviz Technologies compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Innoviz Technologies's revenue will grow by 66.5% annually over the next 3 years.
• The bearish analysts are not forecasting that Innoviz Technologies will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Innoviz Technologies's profit margin will increase from -197.9% to the average US Electronic industry of 9.0% in 3 years.
• If Innoviz Technologies's profit margin were to converge on the industry average, you could expect earnings to reach $15.6 million (and earnings per share of $0.06) by about August 2028, up from $-74.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 31.9x on those 2028 earnings, up from -4.8x today. This future PE is greater than the current PE for the US Electronic industry at 22.7x.
• 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 10.62%, as per the Simply Wall St company report.

Innoviz Technologies Future Earnings Per Share Growth

Risks

• Growing adoption of autonomous vehicles and acceleration in robotaxi deployments are increasing market demand for automotive-grade LiDAR, and Innoviz's relationships with industry leaders like Mobileye, Volkswagen, and a top 5 global OEM position the company well to benefit from this trend, directly improving revenues and future earnings potential.
  
• Expansion into high-margin, nonautomotive applications with InnovizSMART-including security, smart cities, robotics, and industrial automation-diversifies revenue streams beyond the cyclical automotive sector and offers significantly higher average selling prices and margins, supporting long-term profit growth.
  
• Multi-year development and supply agreements, including having two out of five top global automotive OEMs as customers and ongoing discussions for expanded programs, create a more predictable and growing pipeline for commercial revenues, thus improving revenue visibility and reducing volatility in financial performance.
  
• Ramp-up of mass production through partnerships with leading manufacturing partners such as Fabrinet enables Innoviz to meet rapidly increasing demand while benefiting from economies of scale, further supporting improvements in cost structure and gross margins over time.
  
• Operational discipline illustrated by substantial reductions in cash burn, improved operating leverage, and the ability to unlock value from NRE payment plans positions the company to maintain liquidity and move toward sustained profitability, thereby strengthening net margins and long-term shareholder value.

Valuation

• The assumed bearish price target for Innoviz Technologies is $1.5, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Innoviz Technologies's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $1.5.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $173.9 million, earnings will come to $15.6 million, and it would be trading on a PE ratio of 31.9x, assuming you use a discount rate of 10.6%.
  
• Given the current share price of $1.78, the bearish analyst price target of $1.5 is 18.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• 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.