2023-03-23 14:37:00 ET
Summary
- Aeva announced a promising deal with an Top 10 auto OEM with production starting in 2025.
- The Lidar sensor company provided no financial details on the deal limiting any stock reaction.
- The stock trades at cash value while Aeva could end the year with billions in forward-looking order backlog.
The Lidar sensor sector remains one of the more intriguing areas where stock valuations have plummeted and opportunities continue to expand. Aeva Technologies ( AEVA ) is a prime example of a company moving closer and closer to production deals while the financial results don't show any of the benefits yet. My investment thesis remains Bullish on the stock trading at cash value with signs of a developing order book while Aeva hardly trades above $1.
Source: Finviz
Still Nothing To See
Aeva reproed Q4'22 revenues of only $0.2 million, though up at $4.1 million when excluding a customer offset. The company has now shipped 4D Lidar sensors to over 40 customers after launching Aeries II earlier this year.
The big news from the quarter was the announcement of a top-10 global OEM vehicle deal. Management didn't provide the customer name and didn't offer up any financial details on the deal other than to suggest start of production on the deal starts in 2025.
In reality, Aeva still has at least 2 years to build the business before the first major production deal launches, assuming the deal timeline doesn't slip. The company is working on other vehicle programs with OEMs, but these deals are difficult to land in a competitive market.
On the Q4'22 earnings call , the CEO made some promising comments that Aeva beat out other Lidar suppliers on the top-10 OEM deal as follows:
So we're now in multiple RFQ programs as a result of our ability to ship last year with Aeries II and there are a number of decisions that are happening. We expect to happen this year and one of course, case in point of this clear evidence is that this top-10 OEM that we talked about, which is an established leader in automotive, as I mentioned on the call with significant scale and we've been working with this OEM for some time now, and this OEM was tested with other three [indiscernible] LiDARs in the prior development stages since our close collaboration is now in the next stage is actually decided to our LiDAR technology, the four LiDAR as the long range LiDAR on the fleet vehicle.
The news is encouraging as Aeva continues to line up backlog and partnerships in the automotive and industrial space starting with a deal with PLUS and announced partnerships with Nikon and SICK Ag. Any signs the Lidar sensor company can announce the actual auto OEM and more details on the terms of the potential large future order would be positive for the stock.
The stock values in the Lidar sensor sector are currently based on current basic pre-production revenue levels. Whereas, Aeva would trade far higher on billions in orders, if they were completely locked in like assumptions with the order book for Mobileye ( MBLY ). Since the auto tech company first went public before the Intel ( INTC ) buyout, the stock always traded at aggressive valuations due to the large ADAS order books in out years similar to the scenario with Aeva now.
Trading At Cash Value
Not many stocks could announce a large OEM worth possibly in the billions and still trade at cash value. Aeva currently has a market cap of $325 million based on 218 million shares outstanding while the company ended 2022 with a cash balance of $324 million.
Aeva reported a non-GAAP loss of $128 million for the year and lost $39 million for Q4 alone. The Lidar company plans some cost reductions in 2023 to maintain the cash runway until the new deal starts production, hopefully in 2025.
Management guided to 2023 revenue growth of only 50%+ in another sign the stock probably won't rally much this year. The 4D Lidar company only produced 2022 revenue of $8 million leading to 2023 revenue projections of $12+ million while analysts were up at $16 million.
Either way, neither number is all that impressive and investors have to rely on questionable order books not disclosed by Aeva to value the stock. Though, these orders are going to come at some point, the market clearly isn't going to reward shareholders until further details are forthcoming and possibly not until production deals start.
Major Risk
The big risk to the investment story is production deals being pushed out into 2026 and beyond. Aeva doesn't have the cash at this current annual cash burn rate of $117 million in 2022 to handle production deals delayed 12+ months.
The company could possibly take on some debt easily with deals lined up, but the biggest risk for shareholders is a company getting close to production having to raise dilutive capital with the stock trading far below the public offering price of $10. Naturally, the worse possible outcome would be these deals not actually materializing with automotive OEMs actually implementing production with other Lidar sensor suppliers or even different technology.
Takeaway
The key investor takeaway is that Aeva continues to make promising progress on Lidar production orders. The company has the cash to continue burning at the current rates for 2+ years heading towards production deals by 2025. The stock is cheap trading at cash value, but investors have to prepare for a few more volatile years until production deals start.
For further details see:
Aeva Technologies: Promising Signs