2023-08-03 18:09:26 ET
Summary
- Innoviz Technologies Ltd. reported a mixed Q2 2023, with the company starting a production deal with BMW.
- The Lidar sensor company guided up 2023 revenue targets to $15 to $20 million.
- The stock is cheap here with a market cap of $550 million far below the forward looking order book.
The Lidar sensor company released a decent Q2 report , but Innoviz Technologies Ltd. ( INVZ ) didn't budge on the hiked numbers. The company discussed an expansion of a production deal with BMW ( BMWYY ) and guided up revenue forecasts for 2023, but the market isn't impressed. My investment thesis remains ultra Bullish on the stock as the market ignores the upside potential.
Underwhelming Numbers
The biggest problem facing Innoviz is that quarterly results aren't impressive. Luminar Technologies ( LAZR ) reported quarterly revenues of nearly $15 million , while Innoviz is stuck in the $1 million range .
The Lidar sensor company's reported revenues beat estimates, but Innoviz actually saw sales fall nearly 20% YoY as follows:
As with the past quarters, Innoviz discussed strong future prospects not inherent in the current numbers. Revenues are expected to at least double in Q3 and soar in Q4 due to the combined production units for the BMW Series 7 Level 3 project and a shuttle program.
The 2023 revenue guidance was hiked from $12 to $15 million to $15 to $20 million now. If Innoviz his the 2023 target, Q4 revenues will have to reach $10 million following only $2.5 million in the 1H for a major inflection point for the Lidar sensor business.
The company is taking the next step with BMW by working on a complete Tier 1 solution for the premium auto manufacturer. The new solution would include the InnovizTwo Lidar, a new InnovizCore AI compute module, and AI-powered software solutions.
The big question brought up by the work on the next generation solution, including the InnovizTwo chip, is the security of the current production deal with BMW. Innoviz has long promoted a $6.9 billion forward-looking order book, and some of the statements made by the company and competitor Luminar continue to highlight the fears in the market that auto manufacturers are constantly looking for Lidar upgrades and questioning existing deals.
Of course, the Volkswagen ( VWAGY ) deal is the one where the company announced $4+ billion worth of the total backlog. BMW was an announced production deal, but the amount was always unclear.
Per the Q2 '23 earnings call , CEO Omer Keilaf suggested some existing Lidar deals held by competitors might not hold (emphasis added):
One interesting insight that I have to offer from some of our RFQ work this quarter is that one customer has indicated that they are only considering 905 nanometer solutions, and another has decided to short list only 905 solutions. For both, this follows their previous experiences with other solutions and the challenges they faced with power consumption and resolution.
Hence, Innoviz has a huge need to actually deliver production sales in volumes. The company reporting quarterly sales in the $1 million range won't cut it going forward as the world looks to move into autos with Level 3/4 autonomy.
Elon Musk continues to push Tesla ( TSLA ) looking to implement FSD (full self-driving) this year, while Cruise Automation, part of General Motors ( GM ), recently announced a move into 7 markets for robotaxis with the addition of the Nashville market.
Deep Value
The stock only has a market cap of $550 million. Innoviz has already doubled off the bottom due to the company finally heading to this major inflection point with revenues.
Innoviz Technologies Ltd. stock is crazy cheap for the opportunity ahead with the large backlog. Unfortunately, the company didn't address the order book situation, but Innoviz has a massive pipeline opportunity with BMW, with shuttle program and Volkswagen deals included in the big forward-looking order book.
Source: Innoviz Tech. Q2'23 presentation
As expected, the majority of automotive OEM deals are expected to be lined up in the next year or so. Innoviz has a good shot at being one of the major 2 to 3 players in the market. Another major automotive win along with an expansion of the BMW deal with the Innoviz Two Tier 1 solution would set this small company up to be a major Lidar player.
The company ended Q2 with a cash balance of only $130 million. Shareholders definitely face the possibility of shareholder dilution, though management appears confident advanced NRE payments and customer deposits could help some of the short-term funding concerns.
The current cash burn of $25 million gets Innoviz into the 2H of next year. With revenues ramping, Innoviz should quickly cut the gross profit losses and possibly cut the quarterly cash burn rate.
Takeaway
The key investor takeaway is that Innoviz Technologies Ltd. stock is too cheap here with Lidar production deals full speed ahead now. The company has reached an inflection point on the sales side, and another major automotive deal could light a fire under the stock.
Innoviz definitely faces some risk with the low cash balance, as any delay in major production deals would definitely lead to shareholder dilution, while the major automotive deals aren't guaranteed to turn into profitable production deals. Still, INVZ stock is worth the risk here.
For further details see:
Innoviz Technologies: Inflection Point