Shares of autonomous driving specialist Aeva Technologies (NASDAQ:AEVA) — which develops and manufactures next-generation sensing and perception systems — soared on a major win for the company. A top global automaker selected Aeva as its Tier 1 lidar (light detection and ranging) supplier for the former’s series production vehicle program. AEVA stock also soared on the potential ability to distinguish the underlying 4D lidar technology against the competition.
According to the accompanying press release, Aeva believes that the deal represents one of the largest automotive series production awards in its class. Fundamentally, the news reinvigorated positive sentiment in AEVA stock because of the inherent trust involved. Per Mayco International, a Tier 1 supplier provides parts or services directly to an original equipment manufacturer (OEM). As such, it’s not an easy status to reach.
Further, Mayco notes that many people do not realize that OEMs don’t produce their own parts. Instead, they rely on suppliers to provide the parts and components per exact specifications. Therefore, an automaker — especially a highly pedigreed one — wouldn’t just work with any business enterprise.
Soroush Salehian, co-founder and CEO at Aeva, remarked that the deal represents “a defining moment for Aeva.” It’s difficult to disagree as an automaker must entrust its reputation to another party.
AEVA Stock Soars on 4D Lidar Implications
Moreover, Salehian characterized the deal as essentially a milestone for the larger automated driving industry. Again, it’s difficult to disagree with the argument. With advanced technologies such as artificial intelligence (AI) and machine learning rising to the forefront, subsegments such as autonomous driving have witnessed downstream interest. Thus, the lift for AEVA stock symbolizes a broader victory.
Nevertheless, Aeva isn’t in the business for purely philanthropic reasons. Beyond securing the coveted Tier 1 status, the autonomous driving expert has a chance to distinguish its tech from rivals. Specifically, the company focuses on 4D lidar sensors and systems, which can potentially change the autonomy paradigm. As a result, investors jumped on AEVA stock.
Under a classic lidar setup, the underlying system utilizes remote sensing technology — via pulsed laser — to detect nearby objects. Automotive magazine Car explains as follows: ‘
“A transmitter sends signals from the vehicle to its surroundings and, by keeping tabs how long it takes for the signals to bounce off nearby obstacles and return to the car, the system can build up a 3D map of its surroundings.”
However, Aeva adds to this innovation by incorporating an instant velocity component into the broader sensory analytics. As Optics.org mentions, the velocity data is “the real-time segmentation of moving and non-moving objects.” Put another way, Aeva’s lidar system doesn’t just detect objects surrounding the underlying vehicle. Rather, it also calculates where these objects will be (time component) based on current trajectories; hence the fourth dimension label.
While it’s an ambitious undertaking, the aforementioned supplier deal provided AEVA stock with a massive credibility boost.
Why It Matters
Investors should note that AEVA stock currently trades just under a buck, making it extremely speculative. That said, within the past three months, analysts rate shares a consensus moderate buy. However, the average price target is only $1, implying a limited upside from here.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
