Luminar Technologies (LAZR) makes LIDAR — the “Light Detection And Ranging” equipment and software that could, one day, make most cars in the world capable of driving from Point A to Point B entirely autonomously. Knowing this, it seems kind of strange to point out but… Luminar stock can’t quite make up its mind which direction it is heading.
Since coming public in a reverse merger IPO through special purpose acquisition company “Gores Metropoulous” on Dec. 3, Luminar shares first nearly doubled to close at $41.80 on Dec. 8, then got cut nearly in half the following week. The past seven days have seen the stock zigzag once again, to the point that, by the closing trade on Tuesday ($37.37 a share), Luminar shares had recovered nearly all their losses of the previous week.
As volatile as this stock has been this month, you might expect Wall Street analysts to have very strong feelings about it. But in fact, the latest rating on Luminar, penned by Baird analyst Tristan Gerra, was a lukewarm Neutral (i.e. Hold). (To watch Gerra’s track record, click here)
Describing Luminar as “a pure play in solid-state lidars,” Gerra argues that the company’s products already have some utility in cars driving at the L0 to L2 levels of autonomy (incorporating driver-assist functions such as automatic emergency braking, and assisting with parking and driving within a lane). Luminar’s wares will become particularly well suited, though, once cars reach the higher L3 to L4 levels of autonomy, which encompass everything from driving at highway speeds on freeways, to the beginnings of “automated urban mobility,” i.e. driving in congested urban environments with their confusing mix of automobiles, cyclists, pedestrians, and pets. Later, lidar will be absolutely essential for cars to achieve upper levels of L4 autonomy, and eventually L5 — the kind of full automation that would enable driverless taxis, for example.
Problem is, it’s hard to say exactly when each of these levels will be reached, what a given level of autonomy will translate into in terms of revenue for Luminar, or how much the company might squeeze out of those revenues. As Gerra points out, “Luminar’s historical revenues have been small (~$12-13 million in 2018 and 2019).” If the company succeeds in putting as much as $1,000 to $2,500 worth of its equipment in every autonomous car sold, Luminar is promising sales growing past the $200 million range by perhaps 2023, doubling a year later (and achieving positive cash flow and earnings before interest, taxes, depreciation, and amortization as well), doubling sales again in 2025 and growing its profits — and proceeding more or less vertically from there on out.
Suffice it to say this is a bright picture Luminar paints, but as Gerra points out, it’s one not without risks, including “unproven manufacturing capabilities, performance in adverse weather conditions, timing of adoption, pricing, and potential vertical integration” — and competition from market leader Velodyne Lidar (VLDR) to boot.
Ultimately, these unknowns force the analyst to conclude that, despite its potential, Luminar is only a “speculative” investment at present, and not worth more than a neutral rating at present. To this end, the analyst gives the stock a $30 price target, which implies ~20% downside from Tuesday’s closing price.
There is little action on the Street heading Luminar’s way right now, with only two other analysts chiming in with a view on the company’s prospects. 2 additional Buy ratings mean LAZR qualifies as a Moderate Buy. The average price target, though, is $36, and implies ~4% downside. (See LAZR stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.