Driverless technology will disrupt the transportation industry and change driving as we know it.
The technology will make driving safer, is likely to reduce traffic, and will create new opportunities for businesses in the transportation space.
This summer, Intel (NASDAQ: INTC) released a report in collaboration with research firm Strategy Analytics that estimated that self-driving cars would be at the heart of a $7 trillion “Passenger Economy” by 2050.
But while there aren’t may driverless cars on the road today, there will be an estimated 51,000 driverless cars sold worldwide by 2021, and that number is expected to explode to 33 million by 2040.
Intel is gunning to be at the front of the driverless car pack as evidenced by its $15 billion acquisition of Mobileye NV, which develops computer vision technology, earlier this year.
Another big name in the space is Alphabet (NASDAQ: GOOGL, GOOG) and its Waymo division. Waymo is a pioneer in the driverless technology space and is on the verge of launching a self-driving taxi service with as many as 82,000 vehicles on the road in the coming years.
But there are also some smaller players that will see a huge impact from self-driving technology. Here are two stocks in the space worth considering.
Adient (NYSE: ADNT)
Adient (NYSE: ADNT) is the world’s largest automotive seat maker, and chances are good your car has Adient seats as the company is a fixture among all major car makers.
Despite its products being insanely popular among automakers, the company has struggled to make money. It lost $1.5 billion in 2016, recovered last year with a net income of $877 million, and then sank again. After the company announced a quarterly loss of $168 million in June, the then-CEO Bruce McDonald stepped down.
But this week, the company announced its new CEO, Doug DelGrosso, who takes over the helm on October 1. DelGrosso is a savvy choice. He was the COO of Lear Corp. (NYSE: LEA) until 2007 when he went to turn around the bankrupt chassis component supplier, Chassix.
Steve Wybo, the senior managing director at consulting firm Conway MacKenzie said that DelGrosso is a good choice for Adient as “He has a seating background and a turnaround under his belt.”
DelGrosso’s seating background should serve Adient well as it begins to transition its products into the autonomous driving future.
UBS (NYSE: UBS) analysts rate the stock a Buy and believe Adient could stand to gain in the long term with the advent of autonomous vehicles (AVs), saying “ADNT should benefit from increased seating content as adoption of autonomous vehicles alters the interior of the car. Seats in AVs will likely be more configurable (swivel, full-recline, etc.), and could end up looking a lot like premium seating on today’s airplanes.”
As driverless technology matures, cars of the future likely won’t have a steering wheel and transmission column, giving more room to seating.
And when driverless technology reaches the mass-integration stage, Adient is uniquely positioned to dominate the new market as a leading manufacturer and will be tasked with designing and implementing new seating systems for these next-generation vehicles.
Right now, Adient looks like it may be on the cusp of a turnaround that could see its stock climbing higher. Analysts’ average twelve-month price target for ADNT s $59.92, or nearly 38% higher than Thursday’s closing price. UBS rates the stock a Buy with a price target of $73 – 67.7% higher than current prices.
BlackBerry (NYSE: BB)
Yes, that BlackBerry (NYSE: BB).
To say BlackBerry has struggled in the last several years would be an understatement. But while nearly everyone lost hope in the hardware maker, the company has been undergoing a transformation and is now a software stock.
The company is betting its future on the automotive industry and the autonomous car market specifically with its QNX service. In June, BlackBerry reported that QNX is now in 120 million cars, and while only a fraction of those are fully autonomous, QNX is proving to be on the front line of advanced driver assistance and handsfree systems.
“BlackBerry software powers 60% of connected cars on the road today and has the No.1 market share in telematics and infotainment,” said CEO John Chen earlier this year.
BlackBerry has partnered with Qualcomm (NASDAQ: QCOM) to develop and produce automotive platforms for next-generation vehicles in an agreement that allows BlackBerry to fuse its QNX software platform with Qualcomm’s hardware for use in virtual cockpits, vehicle telematics, digital instrument clusters, and infotainment systems.
And this time last year, automotive components supplier Delphi (NYSE: DLPH) announced that it would be using BlackBerry’s QNX system to build an affordable self-driving platform. Delphi chose QNX so that it can improve system performance and security levels in self-driving cars. The deal is a big one for BlackBerry as Delphi is working in collaboration with Intel and Mobilieye on the solution which will be offered to car manufacturers and taxi service providers beginning in 2019.
This is on top of BlackBerry’s already impressive customer list in the automotive space. Their client roster already includes Audi, Ford, Jaguar, and Range Rover, all of which use QNX to power their digital instrument clusters and infotainment systems.
The average price target for BB is $11.95, suggesting possible upside of 15.6% over the next twelve months. Macquarie has an Outperform rating for the stock with a price target of $15.50 – nearly 50% higher than Thursday’s closing price.