Issue #18

Autonomous Driving Winners? 2 Stocks You Need to Watch

The race to power autonomous driving is heating up—and two LiDAR leaders are vying for dominance. While automakers accelerate adoption of advanced safety and self-driving features, companies supplying the “eyes” of autonomy stand at the center of this multi-billion-dollar transformation.

Innoviz Technologies (NASDAQ: INVZ): Delivering record revenue growth, reduced cash burn, and fresh design wins—including a new contract with a top-five global OEM. Its high-volume manufacturing ramp is paving the way for sustained profitability.

Luminar Technologies (NASDAQ: LAZR): Fresh off a production start with Volvo and integration wins with Mercedes-Benz, Luminar is scaling up—but faces execution risks and investor scrutiny following leadership changes.

Both represent different risk/reward profiles in the LiDAR space: Innoviz is steadily de-risking through execution and contracts, while Luminar is betting big on scaling production and governance stability. For investors, the question is clear—which LiDAR stock offers the sharper vision into autonomy’s future?

Innoviz Technologies (NASDAQ:INVZ)

Innoviz Technologies (NASDAQ:INVZ) is a pivotal player in the autonomous driving sector, specializing in the high-performance hardware and software required for the future of vehicle safety and autonomy.

At its core, Innoviz manufactures and sells LiDAR (Light Detection and Ranging) sensors and proprietary perception software—essential technology that acts as the "eyes" of autonomous vehicles, providing a critical 3D understanding of the environment.

Business Model & Revenue Streams

Innoviz operates on a specialized Tier-1 supplier model to the global automotive industry. Its strategy is focused on achieving mass-market adoption through large-volume, long-term production contracts, often referred to as "design wins." The company's long-term valuation hinges on its ability to convert these development agreements into consistent, high-volume, recurring revenue streams.

Key Revenue Components:

• LiDAR Product Sales: The primary long-term source will be the sale of its high-performance, solid-state LiDAR sensors, including InnovizOne (already in production for models like the BMW 7 Series) and the lower-cost InnovizTwo.
• Non-Recurring Engineering (NRE) Services: Currently, NRE payments account for a significant portion of revenue. These are one-time fees paid by automotive manufacturers (OEMs) for development, integration, and customization work, providing essential cash flow during the pre-production phase.
• Perception Software Licenses: Innoviz licenses its specialized software that processes raw LiDAR data to provide advanced object detection and classification capabilities.
• Non-Automotive Sales: Sales of its InnovizSMART system for industrial applications, robotics, and security are key for market diversification.

Macroeconomic Impact

As a high-growth technology company in the pre-mass-production phase, Innoviz is naturally sensitive to broad economic trends.

• Headwinds (Risks): High interest rates and persistent inflation can increase operational costs and, more critically, incentivize OEM partners to cut R&D spending or delay the Start of Production (SOP) dates for new vehicle programs. Management's commitment to reducing quarterly cash burn is a critical mitigation strategy against these potential delays.
• Tailwinds (Growth Drivers): The fundamental structural shift toward Level 3 (L3) and Level 4 (L4) autonomous driving, driven by increasing global safety regulations and consumer demand, continues to underpin the company's long-term growth story, irrespective of short-term economic fluctuations.

Execution & Corporate Milestones

Innoviz is demonstrating strong execution as it bridges the gap between development and mass production. These Q2 figures demonstrate successful progress as the company reaches the next stage of commercial maturity on its path to volume production:

Q2 2025 Financial Highlights:

• Total Revenue: Reached $9.7 million, marking a substantial 46% increase year-over-year (YoY). Revenue for the first half of 2025 ($27.1 million) has already surpassed the total revenue achieved in all of 2024, demonstrating accelerating commercial traction.
• Gross Profit: Achieved a major milestone with a Gross Profit of $1.6 million, significantly improving from the gross loss of -$0.24 million reported in Q2 2024.
• Net Loss (EPS): Improved to -$0.09 (from -$0.13 YoY), reflecting better cost management and meeting analyst expectations.
• Cash Discipline: Quarterly Cash Burn reduced to approximately $7.3 million, aligning with management's goal for single-digit quarterly burn.

Strategic Initiatives and News:

• Major Commercial Win: In September 2025, Innoviz secured a significant new development agreement with a top-five global automotive OEM for its InnovizTwo sensor, targeting a 2027 SOP. This deal represents a crucial validation and endorsement of the InnovizTwo platform and reinforces its position as a preferred technology partner.
• Production Ramp-Up: The successful initiation of high-volume manufacturing at Fabrinet's production line confirms the company’s scalability and readiness for impending large-scale orders.
• Non-Automotive Growth: The launch of InnovizSMART has led to key collaborations and integration into platforms like NVIDIA Jetson Orin, broadening its market potential beyond passenger vehicles.

Valuation & Path to Profitability

Innoviz is an excellent example of a high-growth, pre-profitability technology company, and its valuation reflects this stage of development.

• Path to Profitability: The clear path involves scaling manufacturing volumes for its automotive contracts (2026-2027 SOPs). As volume increases, the high fixed costs associated with R&D and manufacturing will drop sharply on a per-unit basis, driving margin expansion and achieving cash-flow breakeven soon after mass production begins.
• Fair Value: Since the company is operating at a net loss, valuation is based on the multi-billion dollar lifetime value of its secured contracts. The current stock price of (as of September 30, 2025) is seen as highly discounted, reflecting the market's caution regarding the timeline and execution risk associated with these multi-year production ramps.

Analyst Estimates and Ratings

Analyst sentiment remains highly supportive, particularly following recent contract and execution wins.

• Consensus Rating: The consensus rating from 9 analysts is a "Buy," with all 9 analysts recommending a Buy or Strong Buy.
• Price Target: The average 12-month price target is , suggesting a substantial potential upside from the current share price.
• Recent Analyst Actions (Last 30 Days):
• September 29, 2025: Mark Delaney of Goldman Sachs upgraded the stock from "Neutral" to "Buy," raising the price target from to , citing confidence in the company's OEM program progress.

Investor Takeaway

Innoviz offers targeted exposure to the highly selective and profitable automotive LiDAR market. The recent financial performance (record revenue, reduced cash burn) and major contract wins validate its execution trajectory. Analyst confidence, highlighted by the recent upgrades and high average price target, suggests a positive long-term outlook.

What to Watch in the Near Term:

1. SOP Confirmation: Any announcements solidifying the production start dates for the secured OEM programs will be the primary catalyst for significant stock movement.
2. Margin Expansion: Monitoring the continued improvement of gross margins in future quarters will be a key indicator of successful cost management and production scaling.
3. Cash Reserves: Given the capital-intensive nature of hardware production, maintaining the cash runway will be essential to bridge the gap until mass-production revenues start to flow.

Recommendation:

INVZ is positioned as a high-potential, long-term growth investment. Its valuation currently reflects the development risk, but its strong order book and consistent technical milestones make it a compelling choice for investors with a multi-year horizon focused on the future of autonomous vehicles.

Luminar Technologies (NASDAQ:LAZR)

Luminar Technologies (LAZR) is a specialized provider of advanced LiDAR (Light Detection and Ranging) hardware and software solutions. Its core mission is to enable the world's safest and smartest vehicles by focusing on next-generation Advanced Driver Assistance Systems (ADAS) and highway autonomy for both passenger and commercial vehicles. Luminar's key distinction is its proprietary LiDAR technology, engineered to meet the demanding performance, safety, reliability, and cost requirements for high-volume, consumer-grade vehicle production.

Business Model & Revenue Streams

Luminar's business model is predicated on two core revenue streams that support a long-term, high-volume technology adoption curve:

• Product Revenue: This is the primary and fastest-growing segment, stemming from the design, manufacturing, and sale of its high-performance LiDAR sensors (like the Iris and next-generation Luminar Halo). These sensors are integrated directly into vehicles by major Original Equipment Manufacturers (OEMs), such as Volvo and Mercedes-Benz, often as standard equipment on flagship models. Revenue here is characterized by securing forward-looking, multi-year production wins that promise high-volume scaling once series production ramps up.
• Service Revenue: This smaller, but crucial, stream involves the sale of related perception software (like the Sentinel full-stack platform), which processes LiDAR data to enable advanced functions like object detection and collision avoidance, as well as engineering and development services provided to automakers.

The company employs a vertically integrated strategy, developing core semiconductor components and software in-house to maintain a competitive advantage, improve cost-efficiency, and accelerate its product roadmap.

Macroeconomic Impact

As an automotive supplier, Luminar is exposed to broader macroeconomic headwinds, but its long-term growth remains driven by a powerful secular trend: the mandatory adoption of advanced safety technology.

• Negative Impacts (Headwinds): High inflation, rising interest rates, and recession risks can adversely affect the company's prospects. These factors may lead to overall weakness in the global automotive industry, potentially reducing vehicle production volumes, and causing OEMs to delay or cancel non-essential programs. They also increase Luminar's operating costs, particularly its significant Research & Development (R&D) investments.
• Mitigating Factors: Demand for next-generation ADAS/autonomy is viewed by OEMs as a strategic differentiator rather than a discretionary investment. Furthermore, long-term production contracts provide a degree of revenue visibility that partially insulates the company from immediate, short-term economic fluctuations.

Execution & Corporate Developments

Luminar's recent activity has been characterized by strategic restructuring, a focus on cost discipline, and critical production milestones, alongside significant governance changes.

Q2 2025 Financial Highlights:

Luminar's Q2 2025 earnings update highlighted the ongoing challenges of a company transitioning from R&D to high-volume production, while simultaneously implementing aggressive cost control measures:

• Total Revenue: The company reported revenue of $15.634 million, which missed analyst expectations of $17.270 million, reflecting insufficient sales of series production sensors and challenges in generating non-series revenue.
• Loss & Free Cash Flow: Luminar remains pre-profitability. However, the primary focus is now on improving cash utilization. The company has committed to cost discipline, aiming for a significant reduction in operating expenses to below $400 million for the full year, with the ultimate goal of achieving sustainable positive cash flow.

Strategic Initiatives and Corporate News:

• High-Volume Production Ramp: Luminar achieved high-volume Start of Production (SOP) for its Iris LiDAR with Volvo Cars in 2024, notably for the Volvo EX90, which standardizes the technology. This is a monumental step that confirms its ability to produce automotive-grade, high-volume LiDAR. The company is actively ramping production, expecting LiDAR shipments to at least triple year-over-year in 2025.
• Leadership Transition & Governance: In May 2025, the company announced the resignation of its President and CEO, Austin Russell, following a Code of Business Conduct and Ethics inquiry. This transition led to a new operating plan focused on streamlining operations and accelerating the path to profitability, though it initially caused market uncertainty.
• Balance Sheet and Technology: Luminar secured a $200 million capital commitment and improved its capital structure by repurchasing $50 million in 2026 Convertible Senior Notes. The company also unveiled Luminar Halo, its next-generation LiDAR platform, promising performance, integration, and cost improvements.

Valuation & Path to Profitability

Luminar is pursuing profitability through a clear strategy: scaling production volumes to achieve significant economies of scale, thereby driving down the per-unit cost of its sensors, and maintaining strict control over operating expenses.

• Path to Profitability: The key near-term financial target is achieving positive free cash flow, with management aiming for a stronger revenue run-rate by the end of fiscal year 2025 as series production with major OEMs ramps up. Its long-term profitability is contingent upon the automotive industry's ability to drive mass adoption of its technology.
• Fair Value: Assessing the "fair price" for LAZR is challenging as it is a pre-profitability, high-growth technology company. Valuation is based on the future, high-margin, recurring revenue potential from its secured design wins. The current stock price of ≈$2.01 (as of late September 2025) reflects the market's discount due to execution risk, cash burn, and the recent leadership change, effectively valuing the multi-billion-dollar cumulative deal value cautiously.

Analyst Estimates and Ratings

Analyst sentiment is mixed but generally optimistic, reflecting the high-risk, high-reward nature of the stock.

• Consensus Rating: The consensus rating from analysts is a "Hold," with a near-even split between "Strong Buy/Buy" and "Hold/Sell/Strong Sell" recommendations as of late September 2025. This reflects high conviction among those who value the massive Total Addressable Market (TAM) and production wins, balanced by others who remain cautious due to execution, cash burn, and governance concerns.
• Price Target: The average 12-month analyst price target is approximately ≈$2.72, with a wide range from ≈$1.01 to ≈$4.20. This suggests a potential upside of approximately from the current share price.

Investment Thesis: Risk and Reward

Luminar is an investment in the foundational technology of the autonomous driving future. Strong production wins with major global OEMs solidify its position as a technological leader in automotive-grade LiDAR. However, it remains a highly speculative growth stock.

What to Watch in the Near Term:

1. Production Ramp: Monitoring the execution of its production with Volvo and other OEMs is critical. Revenue must increase significantly to validate its long-term potential.
2. Cost Efficiency: Look for sustained improvement in cash burn and progress toward achieving its internal cost-cutting targets.
3. Leadership and Governance: The market will continue to assess the stability and strategic efficacy of the new leadership team.

Recommendation:

LAZR is viewed as a high-risk, high-reward investment. For investors with a high-risk tolerance and a long-term horizon (5+ years), the stock offers exposure to a pivotal component of the future of mobility. Its valuation has been significantly derisked by its production wins, but its ultimate success hinges on flawless execution and its ability to turn massive contract value into profitable revenue at scale.

A Final Word on Your Investment Decision

Innoviz Technologies (INVZ) and Luminar Technologies (LAZR) represent two of the most compelling bets on the future of autonomous driving infrastructure. Both companies offer distinct risk/reward tradeoffs, business models, and execution trajectories—giving investors the flexibility to choose based on conviction, time horizon, and comfort with operational volatility.

Innoviz Technologies (INVZ) – De-Risked Execution with OEM Backing
✔ Q2 2025 revenue up 46% YoY, gross profit positive for the first time
✔ Major new OEM contract (top 5 global automaker) and scalable production ramp
✔ Cash burn reduced to single-digit millions, with clear line of sight to breakeven
➤ Best for: Long-term investors seeking a steadily executing LiDAR supplier with strong OEM traction and improving fundamentals

Luminar Technologies (LAZR) – High-Risk, High-Reward Play on Scaled Autonomy
✔ Volvo EX90 series production underway, with integration wins from Mercedes-Benz
✔ Governance reset and cost-cutting plan targeting sustainable free cash flow
✔ $200M capital commitment and roadmap for next-gen LiDAR (Luminar Halo)
➤ Best for: Speculative investors with a high-risk appetite and belief in LAZR’s long-term design wins turning into large-scale revenue

Investor Insight:

🔍 Looking for steady operational progress and a disciplined path to profitability? → Innoviz (INVZ)
​ 🚀 Want asymmetric upside from a bold autonomy leader with high-volume OEM deals? → Luminar (LAZR)

Your investment choice should reflect your conviction in LiDAR’s role in autonomous driving and your tolerance for near-term volatility. INVZ is gradually de-risking through execution and cash discipline, while LAZR offers explosive upside if it delivers on its high-volume commitments. Both are aiming to power the "eyes" of autonomy—pick the one that fits your strategy.

We’ll be back with our next report soon, bringing you fresh insights on the market and new opportunities to watch. In the meantime, we’d love to hear from you—let us know how you found this report, what niche sectors you’d like us to cover next, and don’t forget to share your top stock holdings with us. Your feedback helps us deliver reports that matter most to your investing journey.

​
Happy Trading
​— Team Premium Stock Alerts