2020 will be the year autonomous driving really starts to take off.
But don’t expect to see driverless cars zooming around many of the roads in your neighborhood. Fully autonomous vehicles will only appear in a few, small parts of the country, with Alphabet’s (NASDAQ:GOOG,NASDAQ:GOOGL) Waymo, its partner Lyft (NASDAQ:LYFT), Aptiv (NYSE:APTV) and General Motors’ (NYSE: GM) Cruise unit likely leading the way.
However vehicles with more limited autonomy have already begun to emerge in the U.S., and will become quite widespread by the fourth quarter. Among the vehicles in this category will be those with highly advanced driver-assistance systems, driverless cars or trucks used by companies to transport objects along fixed routes, and driverless cars used to transport people along fixed routes.
But towards the end of the year, I think the positive impact of much more widespread, truly autonomous vehicles will start to be reflected by multiple stocks.
Three of the stocks poised to benefit the most from the proliferation of autonomous vehicles are Aptiv, BlackBerry (NYSE:BB) and Lyft. The financial results of all three companies are poised to be tremendously boosted by the advent of partially- and fully- autonomous vehicles.
Autonomous Vehicle Stocks to Buy: Aptiv (NYSE:APTV)
The company specializes in semi-autonomous ADAS, including adaptive cruise control (which”slows down and speeds up automatically to keep pace with the car in front of you”) and automatic emergency braking (which automatically applies the vehicle’s brakes to prevent severe crashes).
Orders of the company’s active safety products reached a record $4.2 billion in 2019, and it expects that figure to jump to $5 billion in 2020. APTV predicts its revenue from active safety devices will nearly double from $1.3 billion in 2019 to more than $2.5 billion in 2022.
According to a 2019 Seeking Alpha contributor, Navigant ranked Aptiv behind only Waymo, Cruise, and Ford in autonomous driving execution and strategy (the firm indicated that Aptiv was effectively tied with Intel’s (NASDAQ:INTC) Mobileye).
In September 2019, Aptiv announced a deal with Hyundai (OTCMKTS:HYMTF) to jointly develop fully autonomous and nearly autonomous vehicle technology. The two companies invested a total of $4 billion in the joint venture, and each will own a 50% stake in it. The companies said they would “begin testing fully driverless systems in 2020 and have a production-ready autonomous driving platform available for robotaxi providers, fleet operators, and automotive manufacturers in 2022.”
Since Aptiv has already extensively tested autonomous vehicles both in conjunction with Lyft and by itself at Las Vegas’ McCarran Airport, I think the 2022 target is very conservative. I expect the joint venture to begin selling autonomous vehicle platforms to car companies and other businesses at the end of this year. Given the shortage of drivers in the country, selling such platforms should be a huge business for Aptiv and APTV stock.
The company’s highly secure QNX operating system is ideal for connected and autonomous vehicles for a couple of reasons. QNX has been providing infotainment services to tens of millions of vehicles for many years, so it is already well-adapted to vehicles.
More importantly, QNX’s extremely hard-to-penetrate security, which BlackBerry has greatly enhanced since 2016, is important because if autonomous vehicles are hacked, the results could be fatal.
Since 2016, BlackBerry has made many deals with multiple companies in the auto sector to incorporate QNX into autonomous and semi-autonomous vehicle systems. Among the companies using QNX for autonomous and/or semi-autonomous vehicles are Aptiv, Ford (NYSE:F), Jaguar Land Rover, Denso (which is partly owned by Toyota (NYSE:TM)), and Baidu (NASDAQ:BIDU).
BlackBerry CEO John Chen has said that it takes three years for the company to receive the majority of revenue from QNX deals. As a result, Blackberry’s multiple QNX design wins from 2017 and 2018 will just start meaningfully boosting its financial results this year and in 2021. As a result, BB stock should climb too.
According to Forbes, “BlackBerry previously indicated that it could garner between $5 to as much as $25 per vehicle as it expands into more sophisticated automotive technologies,” up from just $1.50 to $5 previously. Moreover, I believe that the company could eventually generate additional revenue by selling data that QNX obtains from high-tech vehicles.
Lyft is developing autonomous vehicle systems by itself as well as in partnerships with both Aptiv (as I mentioned previously) and Waymo.
I believe that it’s the latter partnership that gives Lyft a big edge. As I’ve noted previously, Lyft and Waymo appears to be meaningfully ahead of their competitors when it comes to launching fully autonomous vehicles.Specifically, “Lyft has been offering fully autonomous rides in Arizona, using Waymo’s vehicles, since last June” while Waymo “recently said that it plans to offer the [ride-hailing] service to more consumers this year.”
It looks like Lyft will get first-mover advantage in the fully autonomous ride-sharing arena. That should be worth many billions of dollars to Lyft and hundreds of percentage points to Lyft stock.
If Lyft’s own research succeeds, it could use its strong brand name with consumers to successfully provide other services like deliveries from restaurants and stores.
As of this writing, Larry Ramer owned shares of BlackBerry stock.