Top 7 Car Stocks to Invest for the Future of Self-Driving
Now we are having a video for what could be the biggest investing theme for the next decade, self-driving cars! Not only will autonomous vehicles change the way we drive but will represent a massive change in everything from public transportation, parking and even auto manufacturing.
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Think about this, if the cost of ride hailing services drops to less than $0.25 a mile, about a third of what it costs to own your own car, and it takes less than five minutes for an autonomous taxi to get to your home…will you even need to own your own car in five years?
That data is from the Ark Invest Big Ideas report, a 112-page research report from Cathie Wood and the team at Ark Funds on the 15 life-changing trends they’re following.
So over the next few months, I’m going to dig deep into these 15 disruptive trends, show you that research, help you analyze it and then reveal the top stocks to buy in each!
I’ll be putting these videos into a special playlist on the channel called Ark Invest Stocks to Buy. Make sure you join the community so you don’t miss any of those videos because these are going to be the stocks you want to be in over the next decade!
Research and Opportunity for Self-Driving Cars
In this video, I’ll show you that research in the opportunity for self-driving cars. We’ll look at the different technologies, who’s ahead and who wins the race in ride hailing autonomous vehicles. Then, I’ll reveal seven car stocks to get ahead of this theme and profit from not just the car makers but the software, hardware and the platforms. Stick around because after those seven car stocks to buy, I’ll reveal one everyone is talking about that you might want to avoid!
Now in autonomous technology there are really three strategies developing. Tesla is using a camera-based approach that is faster to develop and scale but not quite as accurate as the LIDAR-based technology used by Alphabet’s Waymo unit or General Motors.
The camera-based self-driving doesn’t have to rely on the HD maps or a lot of the other infrastructure that has to be built first so it can be first to market.
But this isn’t necessarily a Betamax versus VHS outcome here. Tesla’s camera-based system may be faster to develop but a lot of the LIDAR systems are already being tested. Tesla might be able to launch its ride-hailing platform faster nationally but that doesn’t mean the others are much further behind and the added accuracy may be something that gives them the advantage.
Either way, this is going to change how you think about transportation and owning a car. Ark estimates that autonomous vehicles could lower the cost-per mile to $0.25 for ride hailing. That’s about a third the cost per mile of owning your own car.
And what’s amazing here is with the sharing economy, you might not need to own a car at all. Think about it. The average car spends 95% of the time parked, in your driveway, at work, in the pink princess lot at DisneyWorld.
You really only need a car for a fraction of your day. Now if say one-in-ten people offer their car for self-driving ride hailing, driving people around while the owners aren’t using the car…that’s a ride-hailing car available anywhere within five minutes and at a fifth the cost. IF you have a car, it’s going to be for those rare road trips you take…not for everyday driving.
This will be a MONUMENTAL shift in everything from car manufacturers to gasoline demand and you need to be investing in the car stocks that will benefit! Ark forecasts ride-hailing platforms alone could be a $1.2 trillion market by 2030 with an enterprise value of $3.8 trillion by 2025. Car makers could see a $40 billion boom in the next three years on the surge in demand and ride-hailing fleets could generate $70 billion in earnings on the theme.
Now that you know the research and opportunity behind the self-driving trend, let’s look at seven car stocks to watch, seven companies that could benefit most from the theme. Then I’ll also show you one autonomous vehicle company on every recommendation list EXCEPT mine.
I’ll be putting all seven of these car stocks in my paper portfolio on Webull to follow. I like the research I get with Webull but I love the stock simulator feature. The app gives you a million dollars to use in a paper portfolio, to track your favorite ideas before you invest real money!
Use the link and you’ll get two free shares of stock worth up to worth up to $1,600 when you open an account and make a deposit. You’ll get free shares, a great app for investing and be supporting the channel so I appreciate it.
Now looking across the theme here, the ride-hailing platforms have most to gain as everyone shifts away from driving their own car every day but that’s going to take a little longer. It’s the software and hardware makers that will benefit first on the build-out along with the car makers…so investing here, I want to buy stocks across that supply chain to take advantage of every step in the evolution.
7 Car Stocks to Watch for for a Self-Driving Future
Our first two car stocks are developing the LIDAR technology to enable all this, $2.6 billion Velodyne Lidar, ticker VLDR, is up 34% in the last year, and $9.7 billion Luminar Technologies, ticker LAZR, up 200% in the last year.
Luminar launched its Iris Lidar last year and was awarded its first production deal with Volvo as well as announcing a partnership with Intel’s Mobileye for a robo-taxi service.
The company is testing out system features this year and next and recently partnered with SAIC Motor, China’s largest automaker to integrate the technology in its new line of EV cars.
Management is guiding to twenty-five to $30 million in revenue this year and analysts are expecting sales as high as $115 million by 2023. That still puts the shares at a lofty 323-times this year’s expected sales. The company listed through a SPAC deal in December and it’s completely focused on Lidar rather than other business segments like we’ll see with Velodyne, so maybe that explains some of this valuation premium. Analysts don’t seem too worried though with an average price target of $34.50 per share over the next year.
Velodyne is the smaller company but actually has higher sales and multiple segments outside the autonomous vehicle vertical. The company began testing the world’s first commercial 3D lidar in 2007 and has strategic partnerships with Ford, Baidu, Nikon and Hyundai.
The company’s product portfolio in hardware and software with applications outside of automotive is why I like this one better than Luminar along with a better valuation. In fact, this year’s sales expected at $90 million are forecast to ramp up to $313 million by 2023 which puts the shares at 29-times on a price to sales basis…about a tenth the price of Luminar. Analysts have an average price target of $22 for the shares, about 60% above the current price.
The vast majority of Alphabet’s revenue, ticker GOOGL, is from the Google and YouTube ads business but its Waymo unit actually has the potential to be a big part of the future.
The company has already launched the Waymo One platform for ride-hailing with a Level 4 driverless service in Phoenix and a fleet of 300-plus vehicles. It’s limited to a 50-square mile area now but expanding and the company is testing in 11 cities. It’s also developing Waymo Via for commercial freight which could be another hundred billion-dollar plus opportunity.
Alphabet is guiding to revenue of $226 billion this year, about 24% above last year’s, and the shares are trading at just 6-times on a price to sales basis.
In fact, I don’t think the market has priced in anything from the ride-hailing service or a lot of the special projects Google owns. Recent breakup value analysis puts the ad business at the current market value so you’re getting all the “Other” businesses like Waymo, DeepMind and Calico, it’s life-extension project, these are all like lottery-ticket bonuses on top of the return on search and YouTube. Analysts aren’t expecting much with a target of $2,315 just 14% above the current price but I think it goes much further over the next few years.
Now of course, at two grand a share, you’re going to need to use a platform that offers fractional shares so you can invest any amount rather than a whole share but this is definitely one I’m holding.
We’ve still got four more car stocks to highlight in that self-driving theme but I want to personally invite you to join The Daily Bow-Tie, my free daily market newsletter with all the stock market news, strategies and trends you need to follow. It’s absolutely free, just something I like to offer for everyone in the community, so look for the sign-up link in the description below the video.
Aptiv PLC, ticker APTV, is another established company with benefits in the self-driving taxi space. The company is developing the software to make all this possible and has already signed partnerships with Lyft and Hundai, logging more than 100,000 paid rides in self-driving vehicles.
Aptiv already has a strong business in electronic and safety systems for the auto market, so not just relying on its ride-hailing future. It owns patents across vehicle architecture, security and user experience.
Sales are expected at $15.6 billion this year, about 19% higher from last year so trading for just 2.5-times on price-to-sales. Analysts have an average target of $162 a share, about 11% higher from the current price.
General Motors, ticker GM, is still trying to shake off its legacy car maker reputation but actually has a strong future in autonomous driving and electric. The company received permission to test its Level 4 self-driving vehicles in California last October and began testing in December. Microsoft made a $2 billion investment in the project and is a long-term partner to give the cars access to software and cloud services.
The company is expected to post $140 billion in sales this year, 14% higher than last year, but I think it surprises on the upside if not this year then next. JP Morgan estimates that households are sitting on at least $2 trillion in excess cash savings and with those extra zeros in the bank account, I think people start looking at the higher-ticket spending like a new car in the driveway.
Analysts are expecting just a 10% upside to an average target of $63.80 per share but trading at just 0.6-times on a price-to-sales, this one could easily surprise higher over the next year or two.
Still two more car stocks to highlight and then that one I think you should avoid and Of course, we can’t talk self-driving without Tesla, ticker TSLA. The $643 billion electric vehicle giant unveiled its Tesla Network that could be the first autonomous taxi service available nationally. Ark Invest thinks that could be launched as early as next year and it’s a big factor in the firm’s $3,000 price target for shares.
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Again, Tesla’s camera-based self-driving system is faster to develop and scale than the systems running on Lidar because you don’t need a lot of the mapping and other buildouts but it may not be as accurate, so even if Tesla is first to market, we could see some of these other technologies leap forward later.
Tesla is expected to report $48 billion in sales this year, a solid 52% growth on last year sales but still pricing the shares at 13.4-times revenue. The average analyst isn’t quite as optimistic as Ark Invest, with an average target of $621 per share but a high target of twelve-hundred on analysts surveyed by Webull here.
Intel, ticker INTC, is my sleeper pick for self-driving car stocks. The company acquired systems leader Mobileye in 2017 and has data-sharing agreements with Volkswagen, BMW and Nissan. It’s gathering five million miles of data every day and could help it produce one of the most advanced autonomous systems.
Mobileye is developing its commercial fleet robo-taxi technology for launch as early as next year that could enable a lot of the companies we’re talking about here.
Of course, the bonus here like with Google is the market really isn’t giving the company credit for any of this. Sales are expected at $73 billion this year, down from last year and flat through 2023. Shares are trading for a price of just 3.6-times sales so any rebound in its chip business or the ride-hailing would be a huge surprise upside. Analysts aren’t expecting much with an average target of $63 a share, 4% below the current price.
And now the stock everyone is recommending for self-driving but I’m not quite sold on, $89 billion Baidu Inc, ticker BIDU.
Now like Google, Baidu has a solid internet business and the shares aren’t crazy expensive trading at 4.5-times the $19.5 billion in revenue expected this year.
The company received China’s first license to test its driverless vehicles in December and was the sixth to receive a fully AV testing permit in California. Bidu showcased its self-driving Apollo in September but the problem here is the system it’s using is built on infrastructure sensors. That means it has to put down all these sensors so it’s much more costly to develop and scale the network versus Tesla’s camera-based or even the Lidar system. You need these sensors everywhere you want the cars to work.
Now, the shares probably aren’t a bad bet on its other businesses and the potential revenue, especially from China growth, but I don’t think you buy it based on the upside for self-driving versus these other stocks.
Autonomous vehicles and ride-hailing is going to be a monumental shift in our daily lives. Soon, it will be more expensive to own a car rather than just use self-driving ride sharing taxis. That’s going to affect everything from parking to gasoline demand and will touch every industry in transportation. It’s something you need to be ready for and need to position your portfolio ahead of the trend.