Restrictions due to the coronavirus and regulatory issues have slowed the progress of autonomous vehicles more than I thought they would. However, I still believe that long-term investors will ultimately benefit a great deal from buying autonomous driving stocks. Many companies, including Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), General Motors (NYSE:GM), Velodyne (NASDAQ:VLDR), Embark (NASDAQ:EMBK) and Aurora Innovation (NASDAQ:AUR), are making a great deal of progress when it comes to commercializing self-driving technology on a significant scale.
Meanwhile, fears of the coronavirus have dropped tremendously, and the Biden administration seems to have decided recently to quickly facilitate the proliferation of autonomous vehicles.
For evidence of the latter trend, consider the fact that the U.S. National Highway Traffic Safety Administration recently decided to allow “fully autonomous vehicles” to be built without certain safety features previously required in all vehicles, such as steering wheels. Moreover, U.S. Transportation Secretary Pete Buttigieg said earlier this month that his department does not want to prevent innovation in the autonomous vehicle space. He also predicted that regulation of the sector would evolve a great deal during the rest of the 2020’s.
And at the beginning of March, Intel (NASDQ:INTC) filed papers with the Securities and Exchange Commission to launch an IPO of its Mobileye unit, which develops and sells self-driving and advanced driving assistance systems. If Mobileye’s shares attain a high valuation, they could provide a positive catalyst to other companies in the sector.
Finally, since self-driving automobiles would save both businesses and consumers a great deal of time and money, I continue to believe that the technology will prove to be quite lucrative for the firms that successfully introduce it widely.
As such, I think that the best ways for investors to benefit from the ultimate proliferation of self-driving vehicles is by buying the following autonomous driving stocks:
- Aurora Innovation (AUR)
- Embark (EMBK)
- Velodyne (VLDR)
Autonomous Vehicle Stocks to Buy: Aurora Innovation (AUR)
Encouragingly, way back in 2019, Amazon (NASDAQ:AMZN) invested in Aurora. In the process, it somewhat validated the company’s technology. It also helped make me more confident that Hyundai (OTCMKTS:HYMTF) also invested in the company in 2019.
Recently, Aurora announced that it had developed self-driving technology that is able to “work across multiple vehicle types.” That level of standardization should greatly facilitate the use of Aurora’s system by transportation companies and automakers.
Also increasing my confidence in AUR stock is the fact that the tech startup is partnering with “Volvo on autonomous trucks and Toyota to develop a fleet of self-driving Siennas,” according to Cnet.
The current market capitalization of AUR stock is $6 billion. That’s not low, but I believe that it greatly undervalues the company’s long-term potential.
The company sells self-driving software for trucks called Embark Driver. It charges trucking companies a per-mile subscription fee for the use of the software.
According to the company’s CEO, Alex Rodrigues, Embark uses technology that enables “trucks to update … maps in real time, which is critical when encountering situations like construction work zones, particularly when you’re on a two-lane highway and there are no alternative routes.” Moreover, the company’s system can be easily “integrated” with trucks made by any major manufacturer, and “some of the top carriers in the United States … [are its] customers.” For October, the company said that it had received “14,200 reservations for Embark-equipped autonomous trucks, more than twice the nearest public competitor” at that point.
Rodrigues noted that, in the U.S., human truck drivers cannot drive their vehicles for more than 11 hours each day. And that Embark’s software can dramatically expand that number.
Finally, the CEO reported that “over 1 million real world miles” had been driven using the company’s software “without a single department of Transportation reportable safety incident.”
Stephen Houghton, who was named the company’s COO in February, worked on autonomous vehicles for Amazon and Cruise (currently owned by GM) for six years.
Autonomous Vehicle Stocks to Buy: Velodyne (VLDR)
In a very positive development, Velodyne announced last month that Amazon had purchased a warrant that could enable the e-commerce giant to buy nearly 40 million shares of VLDR stock. The warrant will become exercisable “based on discretionary payments made by Amazon pursuant to existing commercial agreements between Velodyne and Amazon,” Seeking Alpha explained. I think the deal suggests that Amazon believes that Velodyne has a great deal of potential.
Also note that in 2017, Amazon obtained a warrant to buy up to 55.3 million shares of Plug Power (NASDAQ:PLUG) stock. PLUG stock finished 2017 at $1.93. On March 18, 2022, it closed at $26.15.
In 2021, Velodyne’s shipments of sensors jumped 35% versus 2020 to slightly over 15,000. In 2019, the company shipped just over 12,000 sensors. Last quarter, it sold a record 4,900 sensors. The company’s revenue dropped 1.7% year-over-year because of its strategy of using lower prices to gain market share. Ultimately, however, I expect that approach will be quite successful.
VLDR stock is trading at a reasonable trailing price-sales ratio of 7.67x, according to Yahoo Finance.
On the date of publication, Larry Ramer owned long positions in AUR and PLUG stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.