2023-04-17 07:51:51 ET
Shares of LiDAR startup Cepton ( NASDAQ: CPTN ) slid sharply in premarket trading on Monday as JP Morgan downgraded the stock to Underweight.
Equity analyst Samik Chatterjee said his downgrade was motivated, in part, by a “tough macro backdrop” that may cause the LiDAR sector to struggle with a lack of fresh capital. The factor could lead to M&A, but also places many smaller players at risk.
“We expect the current macro backdrop to further accelerate the need for consolidation in the sector with market conditions aiding automotive OEMs by naturally pruning the list of LiDAR suppliers to engage with and validate,” Chatterjee wrote. “While most LiDAR companies have publicly disclosed limited needs for immediate capital injection, the flexibility to invest significantly in R&D in a market segment that remains in relatively early stages of progress on technology will likely be limited for most LiDAR players except a handful with either early series production ramps or robust order books to drive investor confidence supporting capital raises.”
He added that automakers will look for partners with stronger balance sheets and clearer product maps. Chatterjee favors Luminar ( LAZR ) and Innoviz ( INVZ ), pointing to the order books of each company, which should bolster confidence among investors that the two can continue to win. Cepton ( CPTN ), by contrast,has a less certain trajectory.
“We think the path to operating successfully as a stand-alone company appears to hold greater risks at this time,” he concluded. “We are downgrading shares of CPTN to Underweight to reflect the tougher path to scale revenues relative to the industry leaders.”
Shares of Cepton ( CPTN ) dipped 2.5% on thin volume in premarket trading on Monday.
Read more on why Seeking Alpha’s Quant team recently shifted to Strong Sell on the stock .
For further details see:
Cepton stock slips as JP Morgan moves to Sell