The market for lidar, a crucial technology for self-driving cars, is entering a new stage of maturity. This shift allows investors to distinguish between different companies and their stocks in this sector.

Ouster's Strong Second Quarter Results

On Thursday, lidar company Ouster (ticker: OUST) reported its second-quarter financial results. The company posted an adjusted loss of $24 million before interest, taxes, depreciation, and amortization. This figure aligned with Wall Street's expectations. Ouster's sales for the quarter reached $19.4 million, also in line with estimates.

Optimistic Outlook for the Current Quarter

Ouster's management has a positive outlook for the current quarter, projecting sales between $20 million and $22 million. Although slightly below Wall Street's expectation of around $22 million, this outlook demonstrates confidence in the company's future performance.

Market Reaction

Following the release of Ouster's results, the company's shares experienced a modest 1% decline during after-hours trading. This decline may be attributed to rising investor expectations leading up to the earnings report. Over the past three months, Ouster's shares have grown by approximately 23%, outperforming the S&P 500 and Nasdaq Composite, which increased by 8% and 11%, respectively.

Strong Momentum After Merger

It is important to note that year-over-year comparisons are not meaningful for Ouster due to its merger with lidar producer Velodyne in February. CEO Angus Pacala expressed excitement about the company's second consecutive record quarter, stating, "I'm thrilled with the momentum built with the merger."

Noteworthy Performance in Lidar Business

Despite being an in-line quarter with reasonable guidance, Ouster's financial results are significant in the lidar business. Lidar is a laser-based radar technology that equips cars with advanced driver-assistance capabilities. Ouster serves not only the automotive market but also industrial, automation, and smart infrastructure customers.

The Slower-than-Expected Growth of Lidar Start-ups

Lidar start-ups AEye (LIDR), Aeva Technologies (AEVA), and Innoviz Technologies (INVZ) have reported underwhelming second-quarter revenues, with AEye and Aeva both earning less than $1 million, and Innoviz generating less than $2 million in sales. Wall Street analysts project that these three companies will generate approximately $25 million in sales for the full year, with a significant portion (64%) coming from Innoviz. However, these projections fall far short of their combined estimate of $132 million in sales for 2023 when they were raising funds through mergers with special-purpose acquisition companies a few years ago. Their estimation was off by more than 80%.

Ouster, another lidar company, has also experienced slower growth than initially anticipated. Analysts now estimate that Ouster will generate around $83 million in sales by 2023. In contrast, Velodyne and Outer had initially projected combined sales of approximately $735 million for the same timeframe.

Despite the disparity, $83 million in projected sales is still significant. Among early-stage lidar start-ups, only Luminar Technologies (LAZR) is expected to surpass Ouster in revenue, with Wall Street forecasting sales of $85 million by 2023. Interestingly, Luminar had initially projected $124 million in sales for the same year when it was raising funds in 2020.

Luminar's stock has soared due to its impressive sales performance and conservative projections, resulting in a market capitalization of approximately $2.3 billion. On the other hand, Ouster and Innoviz lag behind with market caps of around $200 million and $315 million, respectively. Aeva and AEye have considerably smaller market caps at about $230 million and $57 million.

In terms of total market capitalization, Luminar holds about 74% of the group's value, while Luminar and Ouster jointly account for 87% of the total revenue generated. Both companies will continue to strive for dominance in the forthcoming quarters, aiming to solidify their lead over their competitors.

As analyst Pacala states, not every lidar company will emerge victorious. There are no set rules for success in this industry.

Note: Contact details of Al Root have been removed.