Luminar Technologies: Lost Luster

Summary

  • Luminar Technologies missed Q1'22 revenue targets highlighting the lost luster of the Lidar sector leader.
  • The company maintained 2022 revenue targets of $40 million, but the order book growth isn't impressive at 40%.
  • The stock trades at 30x '23 sales targets likely restricting any rallies until an inflection point exists in the sector allowing a better focus on order books.
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As with most SPAC deals, Luminar Technologies (NASDAQ:LAZR) has struggled to live up to the original hype. The stock actually still trades above $10 unlike most SPAC deals and especially ones in the Lidar space. My investment thesis remains Neutral on Luminar due in part to an irrational stock buyback at higher levels and a general premium valuation for the stock.

Unimpressive Start

Luminar reported Q1'22 revenues of just $6.9 million missing analyst targets by a wide $1.5 million. Like a lot of the Lidar sensor developers, the company hasn't delivered any breakout revenue totals or generally met analyst targets.

The other big disappointment was the limited discussion on increased order book amounts despite a big series production deal with Nissan. Luminar entered the year with an order book of $2.1 billion, yet the company maintained 40% targeted growth for the year after competitor Innoviz Technologies (INVZ) added $4 billion to the backlog on an unnamed deal with an auto OEM.

Nissan PR

Source: Nissan

Of course, investors have to be cautioned on the order book details in the Lidar space due to different reporting requirements and years included in the amount. Still, Nissan forecast having the technology available on new models by the mid-2020s with every new model offering the technology in 2030.

The deal sounds massive for Luminar Technologies, but the company provided details suggesting otherwise with no plans to increase the estimates for the order book for the year set at only $800 million. Remember, this total includes all new series production wins and expansions of existing commercial agreements, including potentially some of the deal with Mercedes-Benz announced at the start of the year.

On the Q1'22 earnings call, the company addressed the order book guidance over the long term. CEO Austin Russel suggested Nissan alone produces 4 million vehicles per year and alone would help meet their 2030 financial model target based on penetration rates:

We modeled out when we first went public. We modeled out the scenario of what the target market penetration was for 2030. And we modeled out 3% to 4%. So 3% to 4% gets 5 billion in revenue, 2.5 billion EBITDA with the 60 billion forward looking order book at that rate. So, just that alone can be able to take up that level of market penetration.

The discrepancy between the 2022 order book target increase and a 2030 goal for revenues of $5 billion and a massive order book is where the market has a lot of problems with Luminar and the Lidar sector. The stock doesn't trade at $10 with a $3.6 billion market cap, if the 2030 order book of $60 billion is seen as reliable.

While Luminar is winning some very impressive production deals in the automotive space, the company doesn't have the revenue base or order book to separate the business as originally suggested by a supposedly market leader in the space. In addition, management shouldn't have rushed out to repurchase up to $312.5 million worth of shares at higher prices. The company bought 2.7 million in shares during Q1'22 at average prices of nearly $15 and had ~$37.0 million remaining on the share buyback plan after spending most of the buyback at much higher prices.

Hard To Value

The problem with valuing Luminar is the discrepancy between the $40 million revenue target this year and the goal for a $2.9 billion order book at year end. In addition, the stock has the most expensive valuation in the Lidar sector due to excitement surrounding large scale automotive deals, but the company doesn't even claim the largest revenue goals in the near term or the largest order book.

What Luminar has is the most expensive stock in the sector. Luminar trades at nearly 30x forward revenue targets while Ouster (OUST) is down to below 3x 2023 revenue targets of nearly $200 million. Aeva Technologies (AEVA) and Innoviz Technologies (INVZ) both trade at substantially lower forward P/S multiples as Luminar despite solid order books, especially the incredible $6.6 billion target of Innoviz.

Luminar stock PS ratio
Data by YCharts

Worth noting, some of these valuations are below actual fully diluted valuations. Due to ongoing losses, these charts don't always grab various stock options and warrants in this sector. In addition, the low share prices are below the exercise price of some warrants, restricted stock awards, earn-out shares and convertible debt conversion.

Takeaway

The key investor takeaway is that Luminar isn't the best deal in the Lidar sector considering the company has the same problems as the competitors, yet Luminar has the highest valuation. The sector is heading towards an inflection point that should allow better valuations in the future based more on the order book size, but for now investors should continue watching this one from the sidelines.

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This article was written by

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Stone Fox Capital Advisors, LLC is a registered investment advisor founded in 2010. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA.


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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock, you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

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