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If you subscribe to the efficient market hypothesis, then you subscribe to the fact that vision-based monitoring technology provider Seeing Machines Ltd has a fair value of 5,101 pence per share, or around a market capitalisation of £208 million.
That might prove him right, but it would also put him at odds with many well-informed City analysts who believe that Seeing Machines’ AI-powered driver safety technology is widely ignored by the market.
Take investment bank Stifel, which reiterated its “buy” rating and 13p per share target price following Seeing Machines’ August 2024 trading update.
In that business update, Seeing machines Revenue for the financial year ending June 30 is expected to be in the range of $67.6 million.
In that trading update, Seeing Machines said revenue for the financial year to June 30 is expected to be in the range of $67.6 million.
This figure was 3% above Stifel’s forecasts, while cash reserves of $23.5 million were in line with market consensus.
“Seeing Machines appears to be increasingly well positioned strategically, with two major Tier 1 automotive suppliers (Magna and Valeo) aligned with the company,” the investment bank said.
And what about broker Peel Hunt, who recently gave Seeing Machines a buy rating with a 9p target price based on some promising market penetration stats?
Seeing Machines technology was fitted to 380,000 cars in the fourth quarter, up from 313,000 in the previous quarter and up 80 percent year-over-year.
As Peel Hunt highlighted, this leaves the company with around 2.2 million cars on the road with its technology, making it the first driver monitoring systems provider to reach this benchmark.
“It appears to be gaining momentum,” Peel Hunt said. “We suspect this is largely due to its relationship with BMW, and its relationship with Volkswagen continues to grow.”
Cenkos (the former brokerage that became Cavendish Securities following a merger with finnCap in 2023) had previously called for Seeing Machines to be valued as a unicorn. For the uninitiated, unicorns are startups valued at £1 billion or more.
That optimistic statement came in early 2023, after Seeing Machines revealed more than 200 percent growth in the implementation of its technology.
The pace of implementation has only continued since then, with Seeing Machines continuing to sign deals with top-tier automakers.
In May of this year, Seeing Machines announced an extension of its collaboration with a major North American Tier 1 supplier and OEM, potentially adding $26 million in incremental lifetime value to its contracts.
In July, the group’s Guardian Generation 3 AI-powered driver monitoring system was successfully installed at Wrightbus, the Northern Ireland-based manufacturer of the world’s first hydrogen-powered double-decker bus.
Seeing Machines CEO Paul McGlone called the deal with Wrightbus “a significant milestone in the deployment of our driver monitoring systems within the public transport sector.”
“The integration of our cutting-edge technology into Wrightbus vehicles is a significant step forward in reducing the risks associated with driver fatigue, which will soon encompass distraction as regulations evolve, and is critical to our mission of saving lives,” he added.
A genuine AI use case
Clearly, there is a disparity between the current value of Seeing Machines and what some analysts believe it is worth.
Which is surprising in the current climate, where anything tenuously linked to AI has the propensity to command a premium from hype-driven investors.
Not that there is anything tenuous when it comes to Seeing Machines and the latest buzzword in technology.
The company’s technology stack is supported by a portfolio of AI algorithms that enable automotive vehicles to see, understand and assist the people who use them.
While some entrepreneurial startups are trying to take advantage of the AI revolution by integrating ChatGPT into salt and pepper shakers and the like, it’s refreshing to see the technology being used to potentially save lives.
Of course, it only becomes commercially viable if the technology works, but in an industry as regulated as the automotive sector, where the lives of billions of people are at stake, securing repeat contracts is a huge red flag.
There could be even bigger opportunities on the horizon: in May 2024, the UK government signed the Automated Vehicles Act, which could allow autonomous vehicles on British roads by 2026.
“The new law puts Britain firmly at the forefront of regulating self-driving technology, unlocking the potential of an industry estimated to be worth up to £42 billion and creating 38,000 more skilled jobs by 2035,” the government said of the law.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, called the legislation “a watershed moment for automotive innovation and road safety in the UK”.
Perhaps it will also help Seeing Machines get on track to that coveted unicorn valuation.
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