Buying a Lidar Lottery Ticket With Luminar
Buying Luminar Technologies (NASDAQ:LAZR) stock is a bet that Light Detection and Ranging (Lidar) will become the standard for making vehicles safe and even autonomous.
It’s also a bet on 26-year old Austin Russell, a California native who took Luminar public in December through a SPAC called Gores Metropoulos.
LAZR stock shot out of the blocks in December, rising to over $46 per share. But it closed on Friday at $21.15. That’s still a market capitalization, however, of $7.18 billion for a company whose sales came in at just $14 million last year.
Of course, its revenue can surge a great deal.
Luminar’s Potential
Right now, Lidar is a game of alliances, of lining up big customers, suppliers, and software vendors. Luminar seems to be winning that game.
Before going public, Luminar’s most important partnership was with Intel’s (NASDAQ:INTC) Mobileye unit. But Mobileye said in December that it would switch to in-house sensors by 2025. That news sent LAZR stock falling within weeks of the company going public.
Luminar’s most important deal may be with Pony.ai, a Chinese company building an autonomous taxi platform with Western capital. Toyota (NYSE:TM) is one of Pony.ai’s partners.
Luminar also has deals with Volvo (OTCMKTS:VLVLY), Audi (OTCMKTS:AUDVF) and SAIC Cars of China. The Lidar company has recruited executive talent from Intel and Tesla (NASDAQ:TSLA).
Last month, after LAZR stock had tumbled, Luminar announced a deal with Airbus SE (OTCMKTS:EADSY) to install its Lidar technology on helicopters.
Who’s the Leader of the Lidar Sector?
Luminar’s deals have led to the belief that it is the unquestioned leader in its field. But it’s far from the only player in the sector.
Argo.AI has gotten $3.6 billion in funding and has partnerships with Ford Motor (NYSE:F) and Volkswagen (OTCMKTS:VWAGY). Like Luminar, Ouster (NYSE:OUST) has gone public through a SPAC, raising $300 million. Privately-held Innovusion has a deal with China’s Nio (NYSE:NIO). Velodyne Lidar (NASDAQ:VLDR), the oldest name in the business, is also publicly traded and has a market capitalization of $1.84 billion.
All of these companies, like Luminar, have cash to burn, corporate alliances, and relatively little revenue. The high number of Lidar makers and their lack of impressive top-line numbers has led some analysts to warn of a “Lidar bubble” that will take all of the sector’s stocks down.
The first Velodyne Lidar system cost $75,000. But Apple (NASDAQ:AAPL) has put a Lidar sensor in its iPhone 12 camera using technology from Lumentum Holdings (NASDAQ:LITE). Apple’s sensor has a range of just five meters, however. Automotive lidar systems must have a range of about 200 meters at least.
The trade press is filled with breathless stories of breakthroughs, but EE Times recently concluded, “No single winning technology has yet emerged.”
The Bottom Line on LAZR Stock
LAZR stock is a lottery ticket.
No one — including analysts, scientists and this humble columnist – can predict Lidar’s future with accuracy. Luminar is hot because it has many business alliances. But if a rival company scores a breakthrough on price, range, or software, it could easily become the sector’s leader.
That’s because Lidar is still not being installed in many automobiles. For it to become a standard feature, its cost must drop.
That makes it impossible for me to determine whether Luminar or any of the other big Lidar players is a good investment, They are facing known unknowns, unknown knowns, and, most importantly, too many unknown unknowns to be at all certain about them.
On the date of publication, Dana Blankenhorn held long positions in Intel and Apple. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.
