Beaten-down lidar stocks could provide investors with one of the biggest opportunities of 2023. After all, lidar is an essential piece of the self-driving-auto puzzle.

Lidar allows vehicles’ computers to take a 3D image of the area around them. The sensors can then measure the range or speed of objects, bounce lasers off the objects, and calculate their distance from the vehicle. It’s essentially the eyes and ears of autonomous vehicles and helps them avoid hitting people, animals, and other vehicles.

Moreover, the lidar-sensor market is expected to be worth about $5.6 billion by 2031, according to TheBrakeReport.com. Unfortunately, the adoption of lidar has been slow, and the space has become highly competitive as lidar manufacturers have arisen all over the world.

Partly due to these trends, a number of lidar companies have combined with each other. In fact, as pointed out by TechCrunch.com, Velodyne (NASDAQ:VLDR) recently acquired Bluecity.ai. In 2021, Ouster (NYSE:OUST) acquired Sense Photonics. And Ouster and Velodyne agreed to merge in an all-stock deal, which will give each party a 50% stake in the combined firm.

Both Velodyne and Ouster have been losing money, and both have watched their stock valuations plummet. But they believe that together, they can “create a vibrant and healthy lidar industry by offering both affordable, high-performance sensors to drive mass adoption,” enabling them to  generate  profitable and sustainable revenue growth,” Velodyne CEO Dr. Ted Tewksbury said.

While we wait to see what happens next in the potential $5.6 billion market, here are three other lidar stocks that investors may want to consider.

Luminar Technologies (LAZR)

After dropping from about $10.47 to just under $7, Luminar Technologies (NASDAQ:LAZR) is showing signs of life again. As one of the top lidar stocks on the market, LAZR has partnered with auto industry giants, such as Toyota (NYSE:TM) and Volvo(OTC:VLVLY). The latter automaker just unveiled an $80,000 electric SUV that utilizes Luminar’s lidar.

LAZR’s earnings have also been solid, as its third-quarter results beat analysts’ average expectations. The firm’s sales, for example, came in at $12.8 million, versus the average estimate of $9.9 million. The company also maintained its full-year revenue forecast of $40 million to $45 million.

On the  bottom line, the company’s loss per share came in at 18 cents, two cents better than the mean estimate.

Luminar also noted in its earnings release that SAIC, which it identified as “the largest Chinese automaker,” has launched its R7 vehicle that incorporates Luminar’s lidar. Using the lidar, the R7 will have “advanced safety features and automated driving capabilities over time,” Luminar reported.

iShares Self-Driving EV and Tech ETF (IDRV)

Another alternative is an ETF, such as the iShares Self-Driving EV and Tech ETF (NYSE:IDRV) which offers solid diversification at a low cost of $38.26. With an expense ratio of 0.47%, the ETF invests in emerging market companies that may benefit from growth and innovation related to electric vehicles, battery technologies, and autonomous driving technologies.

With the EV boom racing along and global demand for EVs gaining speed, I believe that IDRV can climb closer to $50 over the next two years. Some of its top holdings include Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), Ford Motor (NYSE:F), General Motors (NYSE:GM), Toyota Motor, and Luminar Technologies.

Innoviz Technologies (INVZ)

Innoviz Technologies (NASDAQ:INVZ), a $753 million LiDAR technology company, is working towards a future that features safe, autonomous vehicles on the world’s roads. Innoviz’s LiDAR and perception software “see” better than a human driver and reduce the possibility of error, meeting the automotive industry’s strictest expectations for performance and safety.

Earlier this year, Volkswagen selected INVZ to supply it with lidar technology for a number of its brands. That agreement raised INVZ backlog to $6.6 billion.

Meanwhile, in April, BMW said its new i7 series electric vehicles would be the first vehickes mnade by the iconic German company to incorporate Innoviz’s lidar sensors.

Moreover, a number of  analysts seem to like the stock. JP Morgan’s Samik Chatterjee initiated coverage of Innoviz Technologies with an Overweight rating and a $22 price target. The analyst forecasts that INVZ will have a “strong” revenue ramp in the second half of this decade, thanks to its backlog of $6.6 billion, reported TheFly.com.

Berenberg analyst Jared Maymon has a “buy” rating, with a $12 price target on INVZ. Even Rosenblatt analyst Kevin Cassidy initiated coverage of the name with a “neutral” rating and a $5 price target.

On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.