Luminar extends losing streak on Mobileye news, valuation concerns

• Luminar’s lofty valuation in a crowded lidar market has drawn naysayers
• Shares of Luminar have been plunging in recent days
• The latest impact came from news that Mobileye’s own sensors could replace Luminar’s system
• Its competitors have also announced new products and upcoming public debuts

Why did Luminar’s share price dive?

The hype appears to be subsiding on Luminar Technologies’ stellar Nasdaq start.

The vehicle sensor maker went public on 03 December 2020 via a reverse merger with a special-purpose acquisition company (SPAC), finishing at US$22.98. It then climbed 82% in three days to close at an all-time high of US$41.80 on 08 December.

However, since then, shares have corrected a hefty 45% in five straight days of declines, sliding to US$22.87 on Tuesday (15 December).

The decline came after Intel subsidiary Mobileye said it is looking to develop its own lidar sensors that will be cheaper, to be used in driverless cars by 2025. Mobileye had earlier inked a deal for Luminar to supply lidar for its robotaxi fleet. However, Mobileye said on Tuesday that its in-house sensors could eventually replace Luminar’s system.

Under the radar, or fading star?

Luminar produces lidar scanners, which use light pulses to render precise images of nearby objects to help self-driving cars avoid collisions.

It will provide the technology for Volvo’s self-driving cars, slated to be available in 2022. Daimler has also invested in the startup as part of a broader partnership to produce autonomous trucks.

Shortly after the Mobileye deal was first announced, Northland Securities’ Gus Richard rated Luminar’s stock ‘outperform’.

But, days later, the Wall Street analyst downgraded it to ‘market perform’ and gave a US$41 price target on 08 December. Though Richard is optimistic the startup will become an industry leader in the long run, he observed the market to still be in its infancy, and said the company faces execution risks.

Also, Richard estimated that the automotive lidar market will be worth US$2.5 billion by 2025, noting Luminar was valued at six times that entire market opportunity based on its 08 December stock performance.

That said, Richard forecast Luminar’s sales more than doubling to US$35 million by 2022, then surging 2,000% to almost US$750 million by 2025.

Competition heating up for Luminar?

Meanwhile, investment newsletter Citron Research also claimed in an 08 December tweet, that the lidar maker was overvalued based on its US$14 billion market capitalisation, describing Luminar as a ‘sucker’s game’.

The short-seller expected Luminar shares to sink to US$20, and instead recommended rival Velodyne Lidar, which had a market capitalisation below US$4 billion.

Adding insult to injury for Luminar was Velodyne’s 10 December announcement of an innovative sensor for autonomous mobile robotics.

Another competitor, SoftBank-backed Innoviz Technologies, on 11 December revealed it will go public through a US$1.4 billion reverse merger closing in Q1 2021. Similarly, Aeva in November agreed to make its stock-market debut through a US$2.1 billion SPAC merger.

And Luminar has yet to turn a profit; it recorded a US$95 million loss last year. However, CEO Austin Russell recently said the company’s orderbook totalled US$1.3 billion, and he foresees strong margins from sales.

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