Artificial intelligence (AI), automation, and robotics have taken the stock market by storm. Yet one overlooked area to invest in these trends is the industrial economy, specifically manufacturing.
PTC (PTC 0.62%) and Cognex (CGNX 2.06%) are driving the next stage of manufacturing. Meanwhile, Luminar Technologies (LAZR 5.11%) is an enticing growth stock that is helping improve driver safety using advanced AI solutions.
Here's why PTC, Cognex, and Luminar are three red-hot Nasdaq stocks worth looking at today.
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Invest in the industrial software that powers automation, AI, and robotics
Lee Samaha (PTC): The revolution in manufacturing is real, and it's based on the increasing productivity of using new technology. With automation and robotics, manufacturers can relocate from low-labor-cost countries and, in doing so, reduce the complexity of their supply chains. Meanwhile, using AI will make machines smarter and improve processes through constant iterative creation and data analysis of the manufacturing process. As such, these technologies will add value to the solutions produced by software providers like PTC.
The company produces computer-aided design software that can be used to create (and modify) a product already in manufacturing. Its product lifecycle management (PLM) provides real-time data to manage a product from conception through production and disposal. Meanwhile, its Internet of Things (IoT) software connects the manufacturer's physical and digital assets to better model and simulate the performance of the physical asset.
All told, while already highly valuable, PTC's solutions will be boosted as more companies adopt automation, robotics, and AI technology. The company is already on track to deliver significant cash flow in the coming years, and the technologies discussed could lead to significant upside potential for the stock in the coming years.
Cognex is on the right side of the AI growth trend
Daniel Foelber (Cognex): Cognex stock has been on a tear and is hovering around a 52-week high.
Cognex is one of those companies that you've probably never heard of, but it provides crucial products for the manufacturing industry. The company makes machine vision products, including sensors and software. These solutions provide all sorts of cool functions that help ensure quality control.
Instead of having a human inspect a product line for inaccuracies, Cognex's products can help with robotics guidance, color identification, automatically inspect a product's qualities such as dimensions, make sure seals and caps are on tight, verify bar code and label accuracy, and more.
The company uses machine learning and AI to improve the accuracy of its algorithms. Cognex has helped to modernize manufacturing and goes to show how far we've come since the assembly line was first invented 110 years ago.
As for the stock, Cognex isn't cheap, largely due to the stock's recent run-up. Analyst consensus estimates for 2024 earnings per share (EPS) are $1.40. Based on its current price of $56 a share, Cognex would have a price-to-earnings ratio of 40 if it notched $1.40 in EPS, which is expensive.
Buying Cognex stock today isn't a bet on its 2024 earnings or really its earnings over the next three to five years, but rather a bet on the continual improvements in its algorithms and its products and the value they will bring to the manufacturing industry. For investors that believe AI and automation will play a growing role in manufacturing, Cognex stock could provide a perfect pairing to Lee's pick, PTC.
Hitch a ride with Luminar
Scott Levine (Luminar): When it comes to the auto industry these days, electric car stocks seem to be all the rage. But that's not to say that there aren't compelling opportunities lurking elsewhere among auto stocks. Take Luminar, for instance. The company is a leader in light detection and ranging (lidar) for the auto industry, and it's currently hanging on the sale rack, trading about 41% lower than its 52-week high.
Making the sensors that are at the core of Advanced Driver Assistance Systems (ADAS), Luminar's technology helps to make drivers' trips a lot safer. And major automakers are recognizing Luminar's leading lidar offerings. In February, for example, Luminar announced that Mercedes-Benz will equip Luminar's Iris sensors and the related technology "across a broad range of its next-generation production vehicle lines by mid-decade." This development follows a two-year collaboration between the two companies, seeming to validate the attractiveness of Luminar's offerings. Volvo is another leading auto manufacturer integrating Luminar's sensors. This spring, Volvo announced that Luminar's sensors would be standard in the Volvo EX90 Excellence, a fully electric SUV.
Because Luminar is still unprofitable, it should only attract the interest of investors who aren't risk-averse. That being said, the company appears to be on the right road toward growth. In its first-quarter 2023 financials report, the company stated that it projects achieving a positive adjusted gross margin by the fourth quarter of 2023. Moreover, management said that it expects to meet or surpass adding at least $1 billion to its forward-looking order book in 2023.
For patient investors who are comfortable with carving out a niche of their portfolios for a more speculative investment, Luminar is well worth a look.
