The resurgence in coronavirus cases is drawing attention to the importance of electric vehicles (EV), and prompting us to reconsider the future of transport by focusing on fully autonomous vehicles and how the same can address safety issues triggered by the crisis. The coronavirus situation is now anticipated to accelerate the adoption of driverless vehicles to carry passengers, transport goods and others.
Moreover, demand for fuel efficient and smarter high-performance vehicles compliant with government imposed stringent emission rules necessitate a future of driving dominated by green vehicles.
Markedly, improvement in the EV infrastructure, which combines innovation in semiconductors, simulation software, electronics testing equipment and measuring instruments, predictive algorithms, and AI, is enabling automakers to bring EVs mainstream sooner than anticipated.
The rapid developments can primarily be attributed to breakthroughs in technology with the integration of robust AI and ML capabilities in the advanced driver-assistance system (ADAS).
The automotive industry bigwigs are making every effort to enhance the safety of passengers and drivers in EVs and self-driving cars, and foot-travelers in transit. Thereby, advanced testing methodologies are in huge demand as automakers and tech companies seek to deliver advanced automotive systems. Ongoing momentum of mobility-as-a-service (MaaS) solutions and the accelerated deployment of 5G are anticipated to be tailwinds.
Despite the coronavirus pandemic-led crisis, the optimism in this space is evident from the notable performance of Global X Autonomous & Electric Vehicles ETF (DRIV), which has rallied 48.8% year to date compared with the SPDR S&P 500 ETF Trust SPY’s growth of 12.7%.
Moreover, recent growing market interest in EVs is noteworthy with
Tesla
TSLA
and
Nio
NIO
up 586% and 1235.6% on a year-to-date basis.
Per
Allied Market Research data
, the global EV market is projected to hit $802.81 billion by 2027, from $162.34 billion in 2019, at a CAGR of 22.6%.
This brings our focus to four technology stocks that are well positioned to gain from the current scenario:
Year-to-Date Price Performance
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NVIDIA
NVDA
is partnering with automotive companies to drive innovation in simulation software, automotive sensors, cameras and LiDars to facilitate driverless transport. The company is working with more than 320 automakers, tier-one suppliers, automotive research institutions, HD mapping companies and start-ups to develop and deploy AI systems for self-driving vehicles.
The Zacks Rank #2 (Buy) company’s launch of Drive AGX Orin deserves a special mention. It is a highly advanced software-defined platform for autonomous vehicles and robots powered by a new system-on-a-chip (SoC) called Orin that consists of 17 billion transistors. It was recently selected by Li Auto, in a bid to accelerate the development of its next generation of EVs. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
The company expects its automotive TAM to be $30 billion by 2025, which comprises $25 billion for driving, $3 billion for training/development of deep neural networks and $2 billion for validation and testing.
Higher sales of AI (artificial intelligence) cockpit solutions and traction witnessed by automotive platforms for infotainment systems position the company well to capitalize on the EV boom.
Notably, the Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward by 5.8% in the past 30 days to $9.66 per share.
Cadence Design Systems
CDNS
continues to invest heavily in verification and digital design products, which is helping it to launch products that address the ever-growing needs of semiconductor companies involved in making chips for ADAS.
Further, Cadence’s Advanced Packaging solutions continue to witness incremental adoption in hyperscale and automotive verticals. Markedly, the company’s Allegro technology was implemented by a well-known auto maker for wafer level system packaging requirements in third-quarter 2020.
Cadence has recently introduced System-Level Verification IP (System VIP) solution. The latest set of offerings provide improved chip-level verification efficiency for customers who are engaged on production of automotive, hyperscale, mobile and consumer chips.
This Zacks Rank #2 company has also won orders from well-known companies like Intel’s MobilEye and Infineon, which are developing ADAS related technologies.
The consensus mark for 2020 earnings has been revised upward by 5.9% in the past 60 days to $2.70 per share.
Investors, looking to invest in mid-cap stocks, can count on
Flex
FLEX
, which is gaining from recovery in automotive sector. The company is expanding its business in the automotive sector especially in the field of autonomous cars and electrification.
This Zacks Rank #2 player has also inked alliance with Leddar Tech to work on LiDAR sensors. Markedly, Leddar Tech is well-known sensing solutions’ developer for ADAS and autonomous vehicles.
For third-quarter fiscal 2021, Flex Reliability Solutions’ is projected to report revenue growth of low to mid-single digits, sequentially, based on a recovering automotive sector and continued strength in industrial end-market such as power products.
Notably, the Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward by 11.5% in the past 30 days to $1.26 per share.
Keysight Technologies
KEYS
is gaining from increasing investment in advanced automotive technology, which led to double-digit growth in orders in fourth-quarter fiscal 2020 in a sequential basis across all regions.
The company is witnessing uptick in ScienLab EV test solutions in Asia and Europe on government mandate-led electrification of vehicles.
In a bid to capitalize on growing investments, the company rolled out a new radar target simulator for ADAS, and another solution for testing Automotive Ethernet standards compliance for in-vehicle networks.
The company has also announced collaborations with SGS and Qualcomm to advance testing of Cellular Vehicle-to-Everything, or C-V2X, technology.
Additionally, improving supply chain management and uptick in 5G chip design solutions on accelerated 5G deployment boosts the company’s business prospects.
Notably, the Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward by 3.9% in the past 30 days to $5.56 per share. Keysight currently carries a Zacks Rank #3 (Hold).
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