Despite well publicised woes in the auto industry, Seeing Machines penetration of the auto market continues apace with the latest quarterly KPIs showing that it is on track to pass 3m cars on the road for this calendar year, as predicted by Safestocks back in May.
The Q1 FY2025 auto figures showed quarterly production of 405,669 units, taking the number of cars on the road with Seeing Machines’ technology to 2,617,091.
That represents 100 per cent growth year-on-year, which sets it apart from all its rivals – none of which has even hit 2m cars on the road.
In a note published today by house analyst Stifel, analyst Peter McNally wrote: “Reassuringly, the company’s 8th Automotive production programme has commenced, which adds another since the 7th was announced at the Q424 KPIs in August (6th at the end of FY23). Although Automotive industry volumes are light, more of the company’s OEM customers are launching, meaning adoption/ royalties should continue to rise further. We think two more are likely in 2025 and additional programmes are launching within individual OEMs providing a compound effect.”
He added: “We think it can probably add another 1.9m cars on the road in FY25E (vs 1.1m in FY24) with only mild decreases in average selling price.”
In a separate interview with Proactive Investors today, Seeing Machines CEO Paul McGlone confirmed that 2 more auto programmes are due to be launched this financial year.
Guardian
McGlone also explained that Guardian Gen 3 sales would be ramping up in the second half. Given that average recurring revenue for Aftermaket driver monitoring (excluding any effect from Caterpillar) rose 13 per cent over Q1 2024, the improved gross margin from Gen 3 hardware sales should underpin an even better performance over the remainder of this financial year.
Indeed, in that same interview CFO Martin Ive again confirmed that the company is determined to hit cashflow breakeven on a monthly basis by the end of this financial year.
Undervalued
Certainly, the company’s share price has recently been hit by concerns over cash, however McNally’s view on this is: “…we believe 3rd party development costs will reduce in addition to headcount, and cash should benefit from growth in higher margin OEM Royalties (c.100% GM) and a Guardian Gen 3 ramp in H225. We think the company has a portfolio of non-dilutive additional cash options if needed, as history suggests.”
McNally adds: “Following the recent share price decline, the shares trade at 3.1x EV/Sales, which we think is attractive for a market leader in a large industry with a 3-year forecast revenue CAGR of 23% or 42% for gross profit through FY27E. Buy.”
Personally, I’m expecting further auto OEMs wins, license deals and a ramp in Gen 3 Guardian sales in the second half to raise the share price significantly as this financial year progresses. Furthermore, many funds are watching this stock from the sidelines and profitability is the key catalyst that I believe will see them buy in.
In my experience, nervous private investors tend to move out of a stock just when they should be buying more or at the very least holding. Mr Market hasn’t done years of research in this stock and is driven by fear and greed. Of course, do your own research.
The writer holds stock in Seeing Machines