Technology giant Apple Inc AAPL continues to push further with its ambitions to enter the automotive market. The company plans on pursuing vehicles, with a heavy focus on autonomous driving.
One stock could have an inside track at becoming a supplier for Apple vehicles.
What Happened: Talks of Apple launching vehicles continue to heat up, with investors eagerly awaiting to hear the details and which companies will be partners.
Loup Funds Managing Partner Gene Munster recently said there was a greater than 50% chance Apple releases a car, but it could be more than five years away.
Munster called the future Apple car a “computer on wheels” and highlighted the strong operating margins it could provide for the company and shareholders.
Munster highlighted Apple capturing 10% of the automotive market and a $60,000 car price translating into around $540 billion in annual revenue, greater than all of its other businesses combined. A 1% market share could add around $300 billion to the company’s valuation, Munster said.
Lidar (light detection and ranging) could be a big part of autonomous driving and given Apple’s current use of the technology, one company could stand out ahead of the rest.
The Small-Cap Lidar Company: Ouster OUST completed a SPAC merger earlier this year as one of several lidar companies to choose this route to go public.
Ouster CEO Angus Pacala highlighted the company having significant revenue and significant customers, making a SPAC route the right choice.
Pacala compared the company’s digital lidar to echo location with bats, pulsing out laser beams and tracking how long it takes to bounce back, in an interview on Fox Business’ “The Claman Countdown.”
Pacala said there is a monumental opportunity within automotive lidar. Automotive makes up around 30% of the company’s revenue and is one of four verticals.
What may be more interesting from the interview was comments Pacala made about Apple, highlighted by Twitter user @pennycheck, who goes by The UndefinedMystic.
“In terms of Apple, they look to digital technologies for the future,” Pacala said.
The iPhone is filled with digital chips and uses the same technology as Ouster, Pacala said in the Fox interview.
“I think that alignment is the ultimate reason why they’ll choose Ouster over a competitive technology.”
During Ouster’s investor day in February, Pacala was asked about a potential partnership with Apple. Pacala highlighted the potential of Apple choosing Ouster due to its digital lidar, while also sharing an interesting personal connection.
“Before joining Ouster, I was going to go manage the whole group,” Pacala said, referring to Apple’s lidar division. Ouster Chief Technology Officer Mark Frichtl previously worked at Apple as a technologies development engineer.
This could be why Pacala smiled at the question of possibly working together and could help put Ouster in the lead of a potential partnership.
“They’ve realized digital sensors are the future.”
Ouster shared a blog post earlier this year highlighting why a giant like Apple decided to choose digital lidar over other lidar technology.
“Digital lidar systems used by Ouster, and now Apple, by contrast require only two chips,” the post reads.
Related Link: 6 Lidar SPACs For Investors To Consider On Apple News
Recent Acquisition: On Oct. 25, Ouster announced the closing of its acquisition of Sense Photonics, a solid-state lidar company that focuses on the automotive industry.
Ouster said that the acquisition helps accelerate the company’s digital lidar product roadmap by more than 12 months.
The deal will also help Ouster deliver on a “flagship development deal with a major global automotive OEM.”
Ouster said it was in advance negotiations with automotive OEMs for five programs, which together represent over $1 billion in potential revenue.
The acquisition also strengthens Ouster’s patent portfolio in digital lidar, which could be a catalyst in the future for licensing.
“Solid-state digital lidar is the holy grail of automotive autonomy and we believe Ouster is the only lidar company prepared to bring it to the mass market,” Pacala said.
OUST Price Action: OUST shares lost 6.37% Monday, closing at $6.17. OUST shares have traded between $6.15 and $14.99 since going public.
Disclosure: Author is long OUST shares.
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