Luminar Technologies: No Respect
Summary
- Luminar Tech. confirmed the Lidar sensor company achieved a 60% boost for the forward-looking order book.
- The company now has a order book topping $3.4 billion, nearly double the current market cap.
- The stock is cheap, but the company gets no respect for the potential order book size in a few years.
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After another strong quarterly update, Luminar Technologies (NASDAQ:LAZR) shareholders still find the stock floundering. The Lidar sensor company continues to line up a massive forward-looking orderbook absolutely ignored by the market. My investment thesis is ultra Bullish on the stock after the dip below $5 corresponds with a flip in the calendar one step closer to full production on multiple automotive programs.
Source: FinViz
Another 60%
Luminar entered 2022 with a forward-looking orderbook in excess of $3.4 billion, yet the stock fell $10 during the year to nearly $4 now. The company even promised a 40% boost for 2022 in the order book and actually delivered a boost topping 60%.
The company has deals with SAIC and Volvo launching within the next year. The Rising Auto R7 is already in production while the Volvo EX90 was recently unveiled and launches next year with the Luminar Iris Lidar as a standard option.
Source: Luminar Q3'22 presentation 
The order book is now at least $3.4 billion for an impressive $1.3 billion increase last year. Importantly, this order book covers just the next 4 years through 2026. Innoviz Technologies (INVZ) famously outlined a $9+ billion order book target for 2022, but the Lidar sensor company uses a 2030 time frame and Luminar’s CFO made a very noteworthy comparison on the Q3’22 earnings call:
I know others in the industry have their own methodology for calculating order books which are different than ours. We kind of did hit back envelope calculation of what our order book would be if we kind of used others in the industries definitions. We were getting the numbers in the $15 billion to $20 billion dollar range.
Even though this comment didn’t attract a lot of investor interest due in large part to the economic weakness, an investor shouldn't look past these large potential orders. Luminar isn’t close to profitable with the business only now ramping up causing investors to irrationally look past the long-term potential.
Back in the last quarter, the company only generated $12.9 million in revenues and wasn’t close to profitable with a loss of $63.4 million in Q3'22. Revenues are rising fast, but the real production ramp in AVs doesn’t start until 2024, at the earliest.
The market doesn’t care about future positive cash flows, but this is exactly dhow any business should be valued. Luminar has the orders from large automotive OEMs that will be turned into sales eventually, whether this occurs in 2024, 2025 or even delayed to 2026.
Boom Time Ahead
The stock now only has a market cap of $1.7 billion. Luminar should be valued based on a multiple of the growth in the order book. In such a case, the Lidar sensor company would have a valuation of $6.5 billion based on a simple 5x multiple for the order book growth, much less the total order book.
Investors can even throw on any multiple of sales estimates or work up a DCV valuation based on the substantial growth rates in the years ahead. After 2022, the consensus estimates have Luminar growing revenues in excess of 100% each of the next 3 years.
Source: Seeking Alpha
The company has a massive cash balance of $553.1 million in order to invest for the growth opportunity over the next decade. The market doesn't have a lot of confidence in the large order books of the Lidar sensor companies due to some disappointments in the sector and the lack of any large order in the industry turning into production revenues, as of yet.
Takeaway
The key investor takeaway is that the scene is set for Luminar Tech. to start producing material revenues in 2023 with a move to incorporate their Lidar sensor into ADAS programs not looking to remove the driver from the car via full autonomous driving. The stock should rally as investors become more comfortable with the validity of the large forward-looking orderbook.
Investors should continue building a position in the Lidar sensor company, though risks of a lower stock price clearly exist with the stock hitting new lows here.
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in LAZR over 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.