What happened

Shares of AEye (LIDR -7.07%) surged sharply higher Tuesday, skyrocketing as much as 106.5%. As of 11:15 a.m. EDT, the stock was up 38.2%.

The catalyst that sent the maker of light detection and ranging (LiDAR) systems and advanced driver-assist systems exploding higher was bullish commentary issued by a Wall Street analyst who began covering the stock.

So what

Roth Capital analyst Suji Desilva initiated coverage on AEye with a buy rating, while also issuing a price target of $15. His new estimate would represent potential gains for investors of more than 237% over the coming year, compared with the stock's closing price on Monday.

A person relaxing and drinking coffee in a self-driving car.

Image source: Getty Images.

AEye creates advanced LiDAR systems that use pulses of light and radar and measure the distance to objects. This technology has become a staple in the pursuit of self-driving technology and the emergence of autonomous vehicles.

Desilva posited that AEye's advanced Intelligent Detection and Ranging (iDAR) system is a "differentiated" LiDAR solution, giving AEye an advantage in the rapidly growing demand for autonomous and advanced driver-assist technology. Furthermore, Desilva expects the company's system to be a top choice for makers of high-end L3, L4, and L5 models, as well as advanced driver-assistance platforms. 

The analyst also believes AEye will reveal a partnership with Tier-1 automotive supplier Continental, which would be a huge vote of confidence for the company's self-driving systems.

Now what

AEye recently went public via a special purpose acquisition company (SPAC), completing its merger with CF Finance Acquisition Corp. III in mid-August, so it's still in its early days.

For the year ended Dec. 31, 2020, the company generated revenue of just $1.58 million, while generating a loss of more than $26 million. For the first six months of this year, revenue climbed to $1.08 million, up 560%, while its net loss of $22.6 million worsened by 65%. 

While the opportunity is vast, AEye has yet to grow into its potential, something investors should consider before staking a claim in this highflier.