After enduring the worst downturn since 2008, the stock market is enjoying a remarkable recovery. To kick off 2023, the Nasdaq Composite just delivered its best first-half returns since 1983 and is up about 35% so far this year. Each of the major market indexes has increased more than 20% from their respective troughs, with some market watchers declaring the beginning of the next bull market, at least by that measure.
Helping fuel the gains this year are rapid advances in the field of artificial intelligence (AI), which promises to increase productivity and ultimately boost profits for companies that adopt this groundbreaking technology.
Analysts are remarkably bullish about the prospects of one beaten AI growth stock. In fact, if Wall Street is correct, this stock is set to soar 300% over the coming 12 to 18 months.
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The best AI company you've never heard of
Innoviz Technologies (INVZ -3.31%) is a global leader in light detection and ranging (LiDAR) technology. While it sounds complicated, it's actually quite simple. The company develops cutting-edge hardware that emits pulses of laser light capable of determining distances to objects in the surrounding area. It also enables "object detection, tracking, and classification, as well as obstacle detection." While this technology is most often associated with self-driving cars, it also powers state-of-the-art driver assistance systems and a range of other industries.
According to Innoviz, it's "a leading provider of high-performance, solid-state LiDAR sensors, and perception software that bring vision to the automotive, drone, robotics, mapping, and other industries." The company's AI software complements its hardware offerings, using "advanced AI and machine learning-based classification, detection and tracking features."
Management contends that this will ultimately be a concentrated two- or three-player market, with the majority of original equipment manufacturers (OEMs) choosing a provider over the next year or so.
Innoviz recently announced another pipeline win, meaningfully expanding its relationship with an existing customer. This development is significant because Innoviz displaced a "development-stage competitor" to get the gig. Management attributes this to the quality of its technology and suspects others OEMs will follow suit.
Finally, CEO Omer Keilaf notes that "the pace of LIDAR decision-making is likely accelerating," resulting in shorter times between design wins.
Another significant opportunity involves chipmaker Nvidia. Innoviz provides the "advanced perception solution" for the Nvidia Drive ecosystem, the company's end-to-end AI auto platform. Innoviz is in discussions with Nvidia to be integrated into additional production programs that span multiple OEMs, resulting in incremental business.
The LiDAR market is expanding rapidly and is expected to grow from $1.4 billion in 2023 to $3.7 billion by 2028, according to research conducted by Markets and Markets.
Show me the money
While Innoviz offers a significant opportunity, it also comes with a fair degree of risk. A quick look at the financial statements helps to drive that point home.
In the first quarter, Innoviz generated revenue of $1 million, down 43% year over year, resulting in a net loss of $35 million. Its revenue will continue to be lumpy due to the size of the deals it makes.
On the bright side, Innoviz has a record number of deals in its pipeline, with bookings of between $20 million and $40 million, but it will still be some time before the company is profitable.
Innoviz will have to walk a fine line. Not only is the company working to out-disrupt the competition, it's at the mercy of the pace of innovation. Furthermore, with a market cap of roughly $440 million, the stomach-churning volatility of Innoviz stock may not be for everyone.
Wall Street is overwhelmingly bullish on Innoviz
While Innoviz is among the more thinly covered stocks on Wall Street, analysts that follow the company are overwhelmingly bullish.
Of the six analysts that cover Innoviz, five rate it a buy or strong buy, and not a single one recommends selling. J.P. Morgan analyst Samik Chatterjee is the most bullish on Wall Street, with an overweight (buy) rating on the shares and a price target of $13, which suggests a 300% upside for investors over Monday's closing price.
Chatterjee expects substantial revenue increases in the second half of 2023, citing the company's "industry-leading" backlog of $6.6 billion, led by its expanding agreements with Volkswagenand BMW Group.
If the analyst has done his homework, Innoviz stock could soar 300% over the coming 12 to 18 months, with shareholders reaping the rewards.
There is, however, valuation to consider. Innoviz stock is currently trading for 40 times next year's sales, so it's by no means cheap.
Innoviz could be one of just a few companies with the technological know-how to provide LiDAR systems to the masses, whether for autonomous vehicles or advanced driver-assistance systems. Based on the recommendations of Wall Street's finest, now is a good time to take a stake in Innoviz -- as long as you have a little appetite for risk.
JPMorgan Chase, parent company of J.P. Morgan, is an advertising partner of The Ascent, a Motley Fool company. Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends JPMorgan Chase, Nvidia, and Volkswagen Ag. The Motley Fool recommends Bayerische Motoren Werke Aktiengesellschaft. The Motley Fool has a disclosure policy.
