There’s no question that advanced driver assistance systems (ADAS) are poised for tremendous growth in coming years, but there's no reason to wait for the rubber to hit the road to invest in this new technology. Baird analyst Tristan Gerra sees three focus areas for investors looking to profit from the rise of autonomous vehicles: auto suppliers, semiconductor suppliers and technology companies.
Gerra anticipates that ADAS penetration will balloon from 20 percent today to as high as 75 percent by 2020. By 2019, the automotive semiconductor industry is expected to reach $28 billion.
“We believe competitive landscape will ultimately be decided based on launches in 2018–2022 when Level 3 & 4 automated driving sees higher adoption (these contracts will be awarded over [the] next 18-24 months),” Gerra explained.
A Few Names
He noted that Alphabet Inc GOOGL GOOG has already achieved full automation in 99 percent of driving scenarios.
When it comes to ADAS auto suppliers, Baird prefers Mobileye NV MBLY, Delphi Automotive PLC DLPH and Autoliv Inc. ALV.
The firm sees ON Semiconductor Corp ON, STMicroelectronics NV (ADR) STM, Analog Devices, Inc. ADI and Xilinx, Inc. XLNX as the cream of the ADAS semiconductor crop.
Finally, the usual suspects are among Baird’s top auto technology stock picks: Alphabet, Tesla Motors Inc TSLA, Apple Inc. AAPL and Amazon.com, Inc. AMZN.
Disclosure: The author holds no position in the stocks mentioned.
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