Shares of self-driving technology company Luminar (NASDAQ:LAZR) have been in a slump recently. But that slump may have just ended. The company delivered a strong business update on Thursday, and today LAZR stock popped more than 15%.
We suspected this would happen. Heading into that business update, we wrote that LAZR stock was significantly undervalued, but that it needed a meaningfully positive catalyst to “wake up” the stock.
We believed that a strong business update could prove to be that upward catalyst.
It appears that is the case. Indeed, the business update was very strong, and Luminar checked off all the boxes it needed to convince investors that this company is doing everything right to position itself for huge growth in the coming years as self-driving cars become a reality.
All things considered, we are cautiously optimistic that the worst of the recent drawdown in LAZR stock is over, and that this stock now has visibility to run back to $50.
Here’s a deeper look.
LAZR Stock: Strong Business Update
As you can tell by the LAZR stock price reaction, Luminar’s March business update was very strong. Here are the highlights:
- Luminar launched and completed builds of its first Iris LiDAR units, and demonstrated strong capability of those first units in the field with industry-leading range performance and resolution. The company has also selected a contract manufacturer in Mexico for series production, implying that progress towards mass production and commercialization is on-track.
- Luminar introduced Sentinel, a full-stack EV solution that combines Luminar’s best-in-class LiDAR sensors and perception software system, with third-party planning software. Sentinel is the industry’s first full-stack autonomous system for series production. It further widens Luminar’s technology moat, as it makes the company more than just a LiDAR hardware supplier and expands the addressable market to full-stack EV solutions. Alpha release is expected by year-end.
- Luminar is continuing to win big-time customer contracts. Most recently, China’s largest automobile manufacturer, SAIC, agreed to equip its R-Brand electric vehicles with Luminar LiDAR and parts of the Sentinel full-stack. The order book now stands at $1.3 billion. It is expected to grow another 30% in 2021, behind at least three more major commercial program wins.
All in all, Luminar is doing everything you want to see out of an early stage disruptor.
The company is fine-tuning the technology, prepping that technology for mass production, fleshing out the product roadmap and winning big contracts.
So long as all these things remain true, Luminar will continue to put itself in a position to grow very, very quickly over the next several years as partially and fully autonomous cars start to make their way onto roads everywhere.
A Turning Point for Luminar Stock
As we wrote previously, the long-term earnings potential of Luminar warrants a LAZR stock price today of $50. But stocks don’t just rise because they’re undervalued. They need a catalyst to shoot higher.
We feel the business update was that catalyst. That is, we think this is a major turning point for LAZR stock, wherein the recent downtrend will end and a new uptrend back to $50 will begin.
Because the catalyst for the selloff — rising bond yields — will likely taper off in the coming weeks. Historically, such long-term “yield surges” only last a month, and we are right at the tail-end of that time frame today. Plus, our fundamental analysis suggests that a “fair” yield on 10-Year Treasury notes is 2% for pretty much all of 2022 and 2023, which gives yields only about 30 basis points of upward mobility over the next 36 months.
All in all, we feel yields will start to stabilize and maybe even tick lower. At the same time, we think sentiment surrounding LAZR stock has materially improved following this strong business update.
Add it all up, and we think you have a concoction for a big rally in Luminar stock over the next few months.
Bottom Line on LAZR Stock
Luminar stock is one of my favorite growth stocks to buy for the long-term.
But it’s not the best growth stock to buy today.
Instead, the best growth stock to buy today is a company that reminds me of a young Amazon (NASDAQ:AMZN). Indeed, I think buying this stock today could be like buying AMZN stock back in 1997 — before it soared thousands of percent.
Which stock am I talking about?
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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