Designing a self-driving car is the easy part. Making it work under all sorts of driving conditions is something else altogether. The key to making a self-driving car work in rain, fog, and snow is ensuring that it can always see everything that is happening all around it. And for that, you need lidar technology.

“Lidar” is an acronym that stands for “light detection and ranging.” Lidar is similar to radar and sonar in that it emits waves into the surrounding environment and measures how much time it takes for each pulse to return to the sensor. But instead of sending out electromagnetic or sound waves, lidar uses light waves to identify objects and determine how fast they are moving.

Even though they all use light waves, not all lidar technologies work exactly the same. I won’t get into all the technical minutiae, but critical variables such as the length of the light waves used and how that data is interpreted by the software being used vary from one manufacturer to the next. The denser the “point cloud” of objects identified by the lidar technology being used, the more accurately an autonomous vehicle can interpret its environment.

If Apple (NSDQ: AAPL) products stand for anything, it’s for being the best-in-class at all times. For that reason, we believe Apple will consider using only the best lidar technology available in its autonomous vehicles. And when you examine all of the variables that determine which lidar technology is the best, the one company that clearly stands out from the rest is Luminar Technologies (NSDQ: LAZR).

Luminar’s lidar technology uses unusually long waves of laser light: 1,550 nanometers (nm) versus the typical 905nm, which helps spot even small and low-reflective objects — dark-colored cars, animals, a child darting into the street — at a range beyond 250 meters.

In addition, Luminar’s proprietary software provides a turnkey solution that accelerates the ability for automobile manufacturers to deliver high-speed highway autonomy at a commercial series production scale.

That’s why several major automakers have selected Luminar as its lidar vendor for their autonomous vehicles:

• In May 2020, Volvo (OTC: VLVLY) announced that its “next generation SPA 2 modular vehicle architecture will be available as hardware-ready for autonomous drive from production start in 2022, with the Luminar lidar seamlessly integrated into the roof.”
• In December 2018, Audi selected Luminar as its lidar vendor, noting that its “high-density sensor is the first to deliver the necessary performance to enable safe and reliable perception.”
• In May 2021, Toyota (NYSE: TM) chose Luminar as its lidar vendor for its pony.ai fleet of robo-taxis in China and California because “it can be integrated into the car better than traditional lidar.”
• In November 2021, Nvidia (NSDQ: NVDA) selected Luminar for its autonomous vehicle platform known as NVIDIA DRIVE Hyperion. The new product should be available in 2024 vehicle models.

In addition to those companies, almost all of the other major automakers are developing their versions of autonomous vehicles.

Allied Market Research recently noted, “The global lidar market was valued at $700.2 million in 2019 and is projected to reach $2.90 billion by 2027, growing at a CAGR (compound annual growth rate) of 20.1% from 2020 to 2027.”

Keep in mind, that estimate was made in April 2020, before anyone knew that Apple was seriously considering making an autonomous vehicle using lidar technology.

According to Luminar, it believes that the total addressable market for its full-stack hardware and software “Sentinel” lidar solution will be at least $150 billion by 2030.

Even without Apple, Luminar is posting strong operating results.

In November, Luminar released its fiscal 2021 third-quarter results, which included an 89% jump in year-over-year (YOY) revenue, following an 84% increase in YOY revenue in the prior quarter.

The company also reinforced its previously raised forward-looking order book growth target to 60% over the prior year, up from the previous target of 40% growth. In addition, Luminar increased its revenue guidance for this year from a range of $25-30 million to $30-33 million.

Not bad for a business founded in 2012 by a 17-year-old Stanford University dropout. But Austin Russell knew he was onto something special. So did billionaire Peter Thiel, who awarded Russell a $100,000 grant to pursue his interest in lightwave technology. Thiel was a co-founder of PayPal (NSDQ: PYPL) and an early venture-capital investor in Facebook (NSDQ: FB). He believes Luminar could follow in those companies’ giant footsteps.

So do we. Although Luminar is not yet profitable, its GAAP net loss of 15 cents per share in the third quarter was just about half of the 30-cent-per-share loss it recorded during the same period the year prior. That’s not a problem, because the company has plenty of money to fall back on until it reaches profitability. At the end of the second quarter, Luminar held $544.9 million in cash and equivalents.

Source: Luminar

We may soon know what the company plans to do with all that money. On August 19, 2021, Luminar announced several additions to its executive team that may portend something big is in the works. The company added four members to its senior management team, including one for a newly created position of vice president of strategic sourcing and materials. If Luminar is about to enter into a vendor relationship with a major client, ensuring that its supply chain can handle the load will be critical to making that partnership a success.

Thus far, the stock market has not picked up on the possible implications of that development. The stock has certainly traded quietly. But we think that won’t last much longer, especially if Luminar confirms that it is in talks with Apple to be its supplier for an autonomous vehicle. If you wait until that conjecture is confirmed as fact, it may be too late. So we recommend buying shares of Luminar while they are still cheap.