2023-06-05 17:08:34 ET
Summary
- Aeva Technologies, Inc. still offers a lot of potential upside due to the market opportunity for Lidar sensors and the promise of a large Top-10 OEM deal.
- The company hasn't provided any material details on future order sizes and manufacturing capacity, leaving investors mostly in the dark.
- Aeva Technologies stock is cheap compared to the massive opportunity ahead, but the cash balance could quickly disappear, potentially requiring shareholder dilution capping upside.
As with the other Lidar sensor companies, Aeva Technologies, Inc. ( AEVA ) offers up a lot of promises with a limited revenue base right now. Unfortunately, with AEVA stock, the company doesn't offer up a lot of details on deals and future order prospects either. The investment thesis remains Bullish at this valuation, but the investment story is definitely difficult to grasp due to the lack of solid details here.
Source: Finviz
Still Mostly Just Promises
Aeva Technologies only reported Q1'23 revenues of $1.2 million, mostly flat with last Q1. The company still promises a Top-10 OEM deal, with the first vehicles already built using 4D Lidar from the company, but again management didn't provide any details on volumes and Lidar sensor costs.
In addition to the Top-10 deal, Aeva promises traction on additional automotive deals with a number of RFQs in the works. Unlike other Lidar players, the company doesn't even provide a version of orders, whether large future orders measurements or billings for the next year.
Investors don't even buy into the Lidar sensor companies like Innoviz Technologies Ltd. ( INVZ ) promising billions in forward-looking order books, so one shouldn't expect much interest in promises of future orders without details from Aeva. Not to mention, the company didn't provide any details on the capacity of the work with Fabrinet Thailand to scale Lidar sensor production.
Investors don't know if Aeva is prepared to produce 100,000 units or millions of units in the years ahead. The amount of capacity built by a contract manufacturer is a good sign on the orders in hand and confidence in future demand requirements from a customer.
The promising data points is that the 4D Lidar technology from Aeva could be replacing some existing 3D Lidar products. Considering the company has been late to the game in announcing deals, the best path to material sales in the future is taking deals from Lidar competitors where auto OEMs are looking for technology enhancements on future products.
On the Q1'23 earnings call , CEO Soroush Dardashti made the following statement:
This includes a joint development engagement with a passenger vehicle OEM, looking to switch from 3D Time of Flight LiDAR as well as advancing to a growing number of RFQs.
Major Cash Question
The good part of the investment story for Aeva is the large cash balance of $284 million. At this point in development with a lot of automotive deals heading towards production ramps in 2024/25, sector stocks with sizable cash positions will have huge advantages to ramp up production to meet demand and last long enough to thrive with the future billions in orders up for grabs.
The company had a Q1 2023 non-GAAP loss of $28.3 million while the cash burn was up at $37.3 million. Aeva guided to a non-GAAP operating expense level of $124 million for the year, hinting at the total cash burn matching these expense levels.
The major issue here is that Aeva could end the year with a cash balance approaching $150 million. The Lidar company won't have a ton of spare cash on any further delays in automotive production deals not ramping up until 2025.
Aeva has 220 million shares outstanding for a minimal market cap of only $300 million. This small market cap provides an attractive valuation, but it's a huge negative for a company that might need to raise additional capital. Any stock trading in the $1s typically ends up diluting shareholders on any capital raise, though the company could potentially take on some debt to bridge any capital gap until major automotive deals ramp up.
Analysts only forecast revenues ramp to $42 million next year, with a sizable jump to $177 million in 2025. While revenues might eventually ramp into the billions, the timing of the sale ramp will have a huge impact on shareholder returns due to share dilution from raising additional capital.
Takeaway
The key investor takeaway is that Aeva Technologies, Inc. has a promising future with 4D Lidar technology and a growing pipeline of deals. The stock valuation reduces the risk further, though the investment story has a ton of questions with the uncertainty on deal sizes and production timing. Ultimately, investors could face major dilution without a huge revenue ramp up in sales needed to cut down on the cash burn.
Aeva Technologies, Inc. investors still have to prepare for another volatile year. When production deals start, AEVA stock should provide a high risk, high return scenario.
For further details see:
Aeva Technologies: Market Needs More