Remember when the cloud came along? Investors were jumping over each other to get a piece of the action. In some cases, it was hard to know which companies would prevail and which were duds. And while it doesn’t seem like there is another industry unfolding quite like that, that would be the wrong assumption. Autonomous car stocks are seeing big boosts as investors are setting their eyes (and dollars) on self-driving car companies.
Some see self-driving cars as a fad or an industry that will fail to garner regulatory approval. Admittedly, regulations and changing consumers’ minds may be a harder feat than the technology. But it’s a necessary feat we need to (and eventually will) see through.
Why’s that? When answering this very question, Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) — spoiler alert — the first company on our list, had an incredible response:
“Annually, over 1.2 million people die on our roadways. In the US alone, traffic collisions kill over 35,000 people a year—the equivalent of a 737 airplane falling out of the sky every single working day of the year—and that number is rising.”
Without further ado, here are seven autonomous car stocks to consider for your portfolio.
Autonomous Car Stocks to Buy: Alphabet (GOOGL, GOOGL)
It’s hard to look at the self-driving car complex without its leader, Alphabet. I call Alphabet its leader because, arguably, it was the first to make meaningful strides in the industry.
In fact, GOOGL’s unit has garnered so much success, it has spun off what was formerly the “Google self-driving car project” into what we now call Waymo.
One analyst recently valued Waymo at $70 billion — so we’re not messing around here when it comes to business. Started in 2009, the company has driven countless test miles. In fact, in 2016 alone, Waymo drove 635,000 test miles in California. It also had a lower disengagement rate (how often the human driver has to interfere) than all of its competition.
So how does this become a business? Seemingly every company has some ties to self-driving cars these days. Tech companies are working on the software, but that’s not stopping BMW, Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM) and others from trying as well.
Obviously, Google doesn’t make cars. But that doesn’t mean its software won’t be on the outside looking in. It has already got Fiat’s Chrysler on board. Fiat Chrysler Automobiles NV (NYSE:FCAU) has a number of other brands under its umbrella too, should the partnership expand in the future.
Potential collaboration with Honda Motor Co Ltd (ADR) (NYSE:HMC) could equate to additional business as well. Waymo also just announced a partnership with ride-hailing company Lyft.
All of this is to say that Waymo is leading the pack when it comes to technology. That technology will find its way into more and more cars in the future, which turns Google’s one-time project into a viable — and big — business.
Autonomous Car Stocks to Buy: BlackBerry (BBRY)
Wait a minute, the beaten-down, giving-up-on-its-phones BlackBerry Ltd (NASDAQ:BBRY)? Yep, that’s the one.
The old phone maker gave up on hardware and is now focusing on what it does best: Software and security. But software in phones and licensing its name aren’t the only things going on at BBRY headquarters.
Instead, the company is trying to pin itself squarely in the middle of the self-driving car race. A big concern — especially once we saw a Jeep hacked while driving — is security.
So in a way, BlackBerry is one of the more interesting plays in the autonomous car stocks list. It’s not focused on making the software, nor the hardware, for the vehicles. Instead, BBRY wants to secure the vehicle and its self-driving platform.
BlackBerry is modifying its QNX operating system to handle autonomous driving software. Think automakers will turn BlackBerry away? Think again. The company is already working with Ford and at the end of 2014 was already in 40 different car brands and 60 million vehicles.
BBRY has real potential here, but execution will be the key. Citron Research even when as far as to say BBRY can double in the next two years. They then compared it to Nvidia Corporation (NASDAQ:NVDA) in the sense that BBRY can completely redefine its business model.
Autonomous Car Stocks to Buy: Qualcomm (QCOM)/NXP Semiconductors (NXPI)
Last October, Qualcomm, Inc. (NASDAQ:QCOM) said it will buy NXP Semiconductors NV (NASDAQ:NXPI) for $47 billion. It came out to a $110 per share deal. Until just recently though, shares of the latter were trading at or below $100.
At the time, some may have had their doubts about whether the deal would go through. Now the question is, will NXPI get more, especially when considering how much QCOM got for its money. $47 billion is no drop in the bucket, but many felt that $110 — a level NXPI actually eclipsed in 2015 — wasn’t enough for such a high-quality company.
When it comes to self-driving cars, NXPI makes necessary equipment for an autonomous car to function. Automotive revenues of $906 million were up 13% year-over-year last quarter. That business is only growing for NXPI, which is exactly why Qualcomm knew it was a smart move to scoop it up.
With NXPI continuing to make meaningful strides in autonomous cars, Qualcomm will be the beneficiary. That is, assuming the company is able to complete the deal. For investors though, buying NXPI stock now makes little sense, unless QCOM increases its bid for the stock. Buying now would just be guessing and hoping, not investing.
For investors who want a pure play on self-driving cars, QCOM is not the one to go with. If instead, though, you want a diversified focus, Qualcomm may be a good stock to buy.
Beware though, Qualcomm does have other issues.
Autonomous Car Stocks to Buy: Nvidia (NVDA)
This list would be a total joke if it didn’t include Nvidia. This baby has been volatile since analysts at Citigroup said the stock could reach $300. Notably, their price target is $180, but still. They made a case for $300, which is some 100% higher from here.
In NVDA’s latest quarter, it grew automotive revenues 24% year-over-year and 9% sequentially. This growth was primarily in infotainment modules, but as autonomous cars begin to pick up pace, Nvidia’s A.I. technology will get a boost.
As management said,
“We are continuing to expand our partnerships with companies using A.I. to address the complex problems of autonomous driving… and continue to view A.I. as the only solution for autonomous driving. The nearly infinite range of road conditions, traffic patterns, and unexpected events are impossible to anticipate with hand-coded software or computer vision alone.”
Nvidia is found inside of Tesla Inc (NASDAQ:TSLA), as Tesla’s Autopilot feature pushes the autonomous car driving boundaries. As Tesla sells more automobiles with self-driving hardware, Nvidia will be relied upon more and more.
But it’s not just Tesla. Since NVDA’s DRIVE PX 2 A.I. car platform began shipping last year, it already has 225 different partners. They range from automakers and suppliers to researchers and startups.
Talk about traction. It’s sort of like BlackBerry when it comes to potential. Nvidia doesn’t need to make self-driving-car software. Like BlackBerry’s goal to secure every automakers’ platform, Nvidia simply wants to be the backbone to it.
If it can, NVDA will be a huge success. But perhaps wait for a pullback before getting long.
Autonomous Car Stocks to Buy: Mobileye (MBLY)/Intel (INTC)
In March, Mobileye NV (NYSE:MBLY) agreed to Intel Corporation’s (NASDAQ:INTC) $15.3 billion takeover offer. The deal values Mobileye at $63.54 per share. With MBLY stock trading about $1 below that level though, it makes little sense to buy now.
However, investors looking to get a piece of the self-driving pie could consider purchasing Intel. Shares are about $2 below the 52-week high and INTC pays a 3% dividend. Intel has beat earnings estimates eight quarters in a row and its last three revenue results had high-single-digit growth.
That may seem unimpressive, but for a $170 billion legacy tech company, that growth is actually pretty good. With a low valuation (just 12.1x forward earnings), INTC has got positives.
Now, it will have Mobileye’s positives, too. Last quarter alone (reported June 1), MBLY grew sales 66% YoY. Expectations aren’t calling for a slowdown either.
Analysts expect MBLY to grow sales 40.7% this year to $504 million. Next year, forecasts call for 45.7% sales growth to $734 million. On the earnings front, analysts expect 42.5% growth this year and 51% EPS growth in 2018.
While these may be small numbers for Intel, the thought is multi-fold. First, autonomous car technology is an emerging growth opportunity. There will be plenty of time and room to grow. Second, Intel’s resources paired with Mobileye’s technology could potentially drive Mobileye to even better results than what’s expected in the coming years. Finally, last quarter Intel reported record first-quarter revenue. Mobileye’s business should only help.
Autonomous Car Stocks to Buy: Tesla (TSLA)
Like Nvidia, it’s sort of hard to talk about an autonomous car technology without mentioning Tesla. The company is pushing the limits when it comes to self-driving features. Its platform, Autopilot, has received criticism in the past as some drivers overestimate its ability.
This has led to several crashes and a lot of bad press. But that’s not hurting the stock. Earlier this month you may remember TSLA stock being near $300. Well, now it’s closer to $400, with shares tagging a new all-time high on Friday at $376.
Here’s the great thing about Tesla though. Even though its vehicles aren’t completely autonomous yet, they can be. All of them.
Tesla currently assembles and sells each car with the hardware necessary for future autonomous car capabilities. As technology improves (like with Nvidia’s A.I. chips) and self-driving cars become smarter, current and future Tesla owners can take advantage.
Because Tesla designed their vehicles’ software to update over-the-air, it can continuously tweak and add new features. Drivers don’t have to get it serviced and can update right at their house to take advantage of new autonomous car features.
So as time goes on, Tesla will continue to push the envelope with its Autopilot feature. This will instantly give it feedback from thousands of different data points (drivers) using the feature. Once the Model 3 is introduced to the mass market, Tesla will be able to roll out new features even faster to a larger market.
Autonomous Car Stocks to Buy: Uber … Sort of
Uber is a pretty interesting name for this list, because it’s not yet a public company.
However, there are several funds that have investments in Uber and can take advantage of its increasing value. Further, if and when Uber goes public, these funds should see the positive results.
These funds include: Fidelity Contrafund Fund (MUTF:FCNTX), Fidelity Growth Company (MUTF:FDGRX) and Fidelity Blue Chip Growth Fund (MUTF:FBGRX).
FCNTX has a $238 million stake in Uber, FDGRX has a $242 million stake and FBGRX actually has the largest, with a $255 million stake. Because these are big mutual funds though, Uber represents just a small fraction of their portfolio.
But combining it with their other stakes, it gives investors a formidable ownership of autonomous car stocks. For instance, FCNTX has a near-$2 billion stake in Tesla (3.33% of the company). It has got an $8 billion stake in Alphabet and $500 million in Nvidia.
Specifically with Uber, the company has been working on its own self-driving car plans. Some may have even seen Uber’s self-driving cars first hand in San Francisco.
The ride-hailing company isn’t standing still either. In August, Uber bought Otto for $680 million, which is a self-driving semi-truck company. Basically, the company makes the aftermarket parts to allow for autonomous trucking. Recently, Uber launched UberFreight, its shipping app for truck drivers.
Self-driving trucking in Otto along with a cargo-hailing app? This spells Uber’s potential domination of the trucking market to me.
These funds give exposure to Uber and others, allowing investors to take advantage of multiple growth channels.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held no position in any stocks mentioned.
