To hear Wall Street tell it, being able to upgrade a car with software over the air is all the reason you need to invest in an automaker, but just because Wall Street says something doesn’t make it true.
Don’t get me wrong. Being able to update hundreds of thousands of vehicles across 14 major car brands is no mean achievement.
And while I applaud the good folks at Stellantis N.V. for targeting roughly $22.5 billion in software sales, I don’t think that’s enough of a hook to invest in the stock – at least not at this point.
Sure, Stellantis hit it out of the park with earnings last quarter, but this statistic can be deceiving. Its long-term profit track record is inconsistent at best.
Instead, there is a Silicon Valley leader that has great car-related technology whose stock has run rings around Stellantis for some time now.
And in the last year, the stock has beaten the broad market by more than seven-fold.
Let me show you why there’s still so much upside ahead…
The Automotive Accomplishments
I have to say that when I read about Stellantis and its aggressive software program in a recent Wall Street Journal story, I was definitely impressed.
After all, it’s no small achievement to equip its new cars, starting in 2024, with an advanced computer system that can be completely updated wirelessly.
Already, Stellantis, which owns Chrysler, Citroen, Fiat, Jeep, Peugeot, and 10 other car brands, has 12 million cars around the world it can connect to wirelessly.
The company’s aim is to have its cars, which include all of Chrysler’s brands, be updated over-the-air with new features and increased security, much like Apple Inc. (AAPL) does with its iPhones.
More importantly, Stellantis wants to make money from this wireless connectivity just like Apple does. Things like special auto insurance based on precisely how a car is being driven, live traffic data beamed straight to the vehicle, and plenty more are on the table.
The goal that Stellantis recently revealed, is to make $22.5 billion a year from these kinds of subscriptions and wireless products by 2030.
That’s 5 times more than the company will make this year from wireless car services.
But to pull it off, Stellantis plans to hire hundreds of software engineers away from their Silicon Valley employers and spend billions of dollars.
While this is impressive, that’s not enough for me to recommend the stock – not right now, anyway.
Our Hidden Alternative
With very choppy trade, Stellantis shares have gained just 3.1% in the past year, well under the S$P 500’s 27% gain.
But there is a tech leader with great products for the car industry that is running rings around Stellantis,
Yes, it is much more expensive than the car maker’s stock and the company is in hardware.
But it has beaten STLA over the past year by a stunning 6,416%.
I’m talking about Synaptics Inc. (SYNA), the maker and developer of human interface devices and software. The firm is probably most famous for creating the first touchpad for portable computers all the way back in 1992.
Even today, chances are the touchpad on your laptop is made by Synaptics. But the company does much more than that, including smartphone fingerprint readers, touch sensors used in many Android smartphones, the audio technology used by many Alexa smart devices, and much more.
In short, any technology that needs to interface with a human and determine who that human is and what they want, Synaptics makes.
That also includes a lot of technology you’ll find in cars. See, Synaptics makes the world’s first combined touch and display controller chip aimed at the car market.
By combining the two chips into one, the firm can make brighter, more readable screens at a lower price than the competition.
This makes the central feature of many cars, the infotainment dashboard, an enjoyable rather than annoying experience. That’s a tall order, as these screens have to function as both control and display for radio, CDs, digital music, GPS, movies, and car settings.
Heads-Up Display
Synaptics also offers the display controller chips that power the driver dashboard. For safety reasons, these display drivers have to make sure information is as bright and readable as possible without blinding the driver or drawing too much power.
Of course, they can’t quit working randomly either.
Synaptics has also created the SafeSense, Design Studio, and Image Studio software suites that allow car makers to simulate, design, and fine-tune their use of Synaptics tech.
This keeps drivers happy, lets car makers focus on what they do best – and keeps them coming back to Synaptics for more.
The firm is even involved in the growing augmented reality (AR) space, which will increasingly become more and more important in cars. Part of Stellantis’s vision for their connected cars, for example, is having a display in moonroofs that shows passengers the names of stars and constellations at night.
That’s the kind of smart display tech that Synaptics is already working on providing.
I recommended the stock in a chat we had back on Sept. 1, 2017. Since then it is up a stunning 638%.
With its great performance, you can see why I continue to recommend it.
Over the past year, Synaptics stock is up 202%. Don’t worry. I still see a lot of upside ahead.
The company is growing earnings by 31% a year, meaning they will double again in less than 2.5 years.
Synaptics stock shows the importance of buying best-of-breed tech leaders and investing for the long haul.
Doing so means you can crush the market while building lasting wealth.
Cheers and good investing,
— Michael A. Robinson
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Source: Strategic Tech Investor