LiDAR, Mobileye And NVIDIA Integration Will Unlock Future Markets

Key Takeaways

• Strategic partnerships and production expansion will bolster customer base and revenue potential through increased demand in autonomous vehicle platforms.
  
• Diversification efforts in non-automotive sectors may open new revenue opportunities, supporting long-term growth and financial stability.
  
• Geopolitical tensions, reliance on milestones for revenue, and execution risks from diversification and R&D investments could lead to volatility and pressure on margins.

Catalysts

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

• Innoviz has secured an $80 million NRE (non-recurring engineering) payment plan with key customers, with the bulk of payments coming between 2025 and 2026. These payments will fund development work on LiDAR technology, enhancing cash flow and supporting revenue growth.
  
• The partnership with Mobileye and integration with NVIDIA Hyperion 8 positions Innoviz to serve a wide range of customers across major AV platforms, potentially expanding its customer base and boosting future revenues.
  
• The company is expanding production capacity significantly in 2025 to meet the growing demands from OEM customers, which is likely to increase revenue as production scales.
  
• Operational optimizations are expected to deliver approximately $12 million in annual savings, improving net margins and reducing cash burn.
  
• Innoviz is exploring opportunities outside the automotive industry, such as in security and smart infrastructure, potentially tapping into new revenue streams and enhancing long-term revenue growth.

Innoviz Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Innoviz Technologies's revenue will grow by 141.0% annually over the next 3 years.
• 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 -390.5% to the average US Electronic industry of 8.3% in 3 years.
• If Innoviz Technologies's profit margin were to converge on the industry average, you could expect earnings to reach $28.3 million (and earnings per share of $0.12) by about April 2028, up from $-94.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.8x on those 2028 earnings, up from -1.3x today. This future PE is greater than the current PE for the US Electronic industry at 19.3x.
• 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 10.3%, as per the Simply Wall St company report.

Innoviz Technologies Future Earnings Per Share Growth

Risks

• The company's reliance on non-Chinese Asian manufacturing partners means any geopolitical tensions or trade disruptions could still impact production and supply chain stability, potentially affecting revenue and profit margins.
  
• The anticipated revenues from the $80 million NRE payment plan are milestone-dependent, which introduces variability and uncertainty around cash flow and revenue recognition.
  
• Innoviz's ambitious plan to more than double its revenues by 2025 relies on the success of new program launches and expansions into non-automotive sectors, which present execution risk and could impact projected earnings if not realized.
  
• The lumpiness in NRE and revenue recognition from quarter to quarter, due to customer milestones, suggests potential future volatility in cash flow and earnings projections.
  
• As the company explores diversification beyond the automotive industry, R&D expenses for new market applications may pressure net margins and cash burn before realizing substantial new revenues.

Valuation

• The analysts have a consensus price target of $2.323 for Innoviz 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 $4.0, and the most bearish reporting a price target of just $0.75.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $339.7 million, earnings will come to $28.3 million, and it would be trading on a PE ratio of 26.8x, assuming you use a discount rate of 10.3%.
• Given the current share price of $0.63, the analyst price target of $2.32 is 72.9% 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.