“The L5 Revolution:” What’s Mizrahi’s “No. 1 Autonomous Vehicle Stock of the Decade?”

What's being teased in ads for Alpha Investor?

By Travis Johnson, Stock Gumshoe, August 9, 2021

What’s the “L5 Revolution?” That’s the next big step forward in autonomous driving, when cars begin to be “highly automated” under most conditions — and Charles Mizrahi has a teaser pitch out for the company he thinks will get us there, dangling his “No. 1 Autonomous Vehicle Stock of the Decade” special report for those who are willing to sign up for his entry level newsletter Alpha Investor ($47, renews at $79).

As with most publishers, the nice thing about the “entry level” or “front end” newsletters is that they’re relatively inexpensive and they offer refunds, making it easy to buy… the annoying thing is that they funnel you into the most aggressive part of the massive marketing machine, because the primary reason for existence for a $49 newsletter is to help identify folks who are willing to pull out a credit card, and eventually upsell them to the “back end” $5,000 newsletter where the publisher’s profits are made. Oddly enough, since those lower-cost newsletters are also generally more sober and less speculative than the high-end services, which seem to feel like they have to recommend moonshot ideas or illiquid penny stocks to justify their high-priced existence (which almost guarantees a bad ‘batting average’), they also tend to get better reviews from our readers — as long as you can stand the relentless upsell pressure.

But anyway, what’s this “Level 5” that Mizrahi is talking up?

SAE International, the Society of Automotive Engineers, has designated six levels of driving automation (0-5), and Level 5 is not really viable yet… but it is inching closer, and is essentially what people mean when they talk about fully autonomous cars, with the driver not having to pay attention at all, no matter what the conditions are on the road.

The most advanced commercial cars right now are level 3, when the driver has to be on standby to take over whenever the car’s computer signals it needs help, but even that is a pretty remarkable step up from the level 1 and level 2 systems that most of us are familiar with, the driver assist features like adaptive cruise control and lane adjustments that have to be constantly monitored by the driver, with hands on the wheel. Level 4 essentially takes you to full autonomy, but only in controlled conditions (like in a city that the car “knows”, or on certain highways), and Level 5 is that “go anywhere” autonomy that doesn’t care if the lane markings are clear or the GPS data is out of date, and doesn’t even need a steering wheel to be installed.

I have no idea how long it will take to reach that level, partly because the variety of truly unpredictable and poorly mapped or marked roads is still quite remarkable, even in the US, and because truly autonomous cars will have to still interact with sometimes erratic human-driven cars for the foreseeable future, but we’re obviously headed in that direction — the debate is mostly about whether it will take a few years or a few decades to get there.

And Mizrahi thinks its the “eyes” of the car that will make the difference, so what he’s pitching today is his favorite of the new crop of LiDAR companies — the companies who are making what until recently were extremely expensive, bulky and impractical laser mapping systems cheaper and more viable for regular passenger cars.

That’s not so new, of course, we’ve been watching the constant parade of hype about next-generation LiDAR systems since the first two SPAC LiDAR mergers (Velodyne (now VLDR) and Luminar (LAZR)) hit the market last year and helped to ignite investor interest both in autonomous driving and in SPAC deals more generally. Mizrahi says that there are 75 LiDAR companies operating now, which I would assume must also include the established auto suppliers who have lower-profile LiDAR products (like Bosch, etc.), whatever early-stage companies are trying to take the next leap forward, and the half-dozen or so “pure play” LiDAR companies who are now publicly traded.

But which one does he like? Let’s run down the clues that he drops…

“LiDAR finally makes financial sense.

“Now, to be clear — $1,000 is still a little pricey for mass production. As in for personal use.

“And that’s why I’m so excited to tell you about a LiDAR company I’ve been following.

“You see, this company has created a LiDAR that can fit in the palm of your hand … and… it costs as low as $400.

“And…

“They’re aiming for $100 in the very near future.”

OK, so that’s promising — it doesn’t get down to the level of the camera and radar systems used by folks like Tesla (which has so far eschewed LiDAR), so we’ve got a ways to go before these kinds of systems can be ubiquitous (those prices are generally for a single sensor, and 360 degree coverage would require four or five sensors for most cars, as well as a fast and nimble “brain” to interpret the data instantly), but $400 is a lot cheaper than these systems used to be.

Mizrahi sees a big market for autonomous vehicles, going from 6,000 units to over four million over the next decade, so I guess you can spitball your own numbers from that — there aren’t likely to be four million autonomous vehicles on the road if the LiDAR sensors run to $1,000 per car or more, but maybe they get down to $300 per car over the next few years? $300 times four million is $1.2 billion, so that’s not a crazy windfall but is real money even for fairly large auto suppliers (industry leader Aptiv (APTV), for example, has revenue of about $14 billion a year), and would be huge for any of the younger LiDAR hopefuls (even the most mature LiDAR company, Velodyne, is still well under $100 million in annual revenue).

And Mizrahi talks about how he narrows down that big list of LiDAR hopefuls to make his pick…

“… there are a lot of LiDAR companies out there right now.

“Forbes reports there are over 75 LiDAR companies alone … focused on cars.

“… that’s where my four decades of experience in analyzing companies comes in. When I research a company, I’m looking for three things before I put a dime into it.

“The company has to be in an industry with a tailwind, run by a rock star CEO, and trading at a bargain price.”

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Those criteria are all a bit squishy, of course, and every player in the industr