2023-07-12 22:50:13 ET
Summary
- Luminar broke recent stock resistance in the $7 range.
- The stock market appears more favorable on hyper-growth stories after a couple of tough years.
- The stock is cheap relative to the growth rate considering the forecast for 100%+ annual growth through 2027.
After a couple of brutal years, the leading SPACs are starting to perk up. Luminar Technologies ( LAZR ) falls right into that category as the company prepares for the production launch of several automotive Lidar deals. My investment thesis remains ultra-Bullish on LAZR stock after the breakout above $7.
Sales Ramp
A lot of SPACs made huge promises a few years back, but only a few of those companies are still backing up huge financial targets. One such company is Luminar with big automotive Lidar deals already signed and on the way towards launch.
The Joby Aviation ( JOBY ) rally should provide some signals that Luminar could hit a launch pad as well. The eVTOL aircraft manufacturer soared some 200% in a couple of months on news surrounding certification of an aircraft with expected initial deliveries a year out and material revenues not arriving until 2025.
Luminar is in a far different position, though both sectors are reliant on massive sales projections by the end of the decade. The Lidar company has promoted a 100% growth rate over the next 5 years through 2027.
The company just reported Q1'23 revenues of $14.5 million, so the market hasn't been too impressed about the 100% growth targets off such a small base. The key here is that such growth of a $40 million revenue base in 2022 starts slow, but the number soars to nearly $1.3 billion by 2027.
- 2023 - $80 million
- 2024 - $160 million
- 2025 - $320 million
- 2026 - $640 million
- 2027 - $1,280 million
Luminar already has production deals with AB Volvo (publ) ( VOLVF ), Mercedes-Benz Group AG ( MBGAF ), Polestar Automotive Holding UK PLC ( PSNY ), and SiAC in China. As well, the Lidar technology company appears all but already designed into the ProPILOT stack being developed by Nissan Motor Co., Ltd. ( NSANY ) for 4 million units of annual vehicle production.
For these reasons, CFO Tom Fennimore discussed at the recent Deutsche Bank Global Auto Industry conference that up to 75% of the 2027 revenue targets are already on the future contracted order book as follows:
So, through 2027 going back to some of the projections and guidance that we shared at Luminar Day, that’s almost fully awarded today. When you look at the business we have with Volvo, Polestar, Mercedes and others, those are actually ones where we have contracts awarded today. Now, look, they still need to sell those vehicles and launch those programs on time to get there.
We said we’d hit that 1 million unit run rate somewhere in that ‘26, ‘27 time frame. The reason why we were a little rangy in some of the timing guidance we gave is because we’re working now on over 20 vehicle lines to launch our products over that time frame. If all 20 go according to the existing time lines, we’ll be there ‘26. If things slip, which sometimes they do in the auto industry, it will be ‘27. We’re just -- we can control to make sure this slippage isn’t become a bus, but there’s a lot of other things that need to go right in order for a vehicle to launch at its stated time line.
And so of that 1 million unit run rate, just from the awarded programs we have today, we’re about three quarters of the way there . And the other quarter is from conversations we’re having real time with existing customers. We’ve already shown the ability to grow our business at Volvo, Mercedes and Polestar.
Remember, Luminar doesn't even include Nissan in the contracted order book due to the deal not being official yet. The market should increasingly become more comfortable with Luminar hitting, or even topping, the $1.3 billion revenue target for 2027.
The forecast is for the company to only sell 1 million in annual Lidar units by 2027 and the Nissan deal alone could be 4x the currently forecasted units. Ultimately though, the actual size of orders is dependent on how well customer vehicle programs sell and whether the Lidar package is a strong selling point or not.
The NHTSA just announced proposed rules for Automatic Emergency Braking, especially on trucks, that could usher in a further push for Lidar into Level 2+ type systems, eliminating the hurdle needed for a complete jump to autonomous driving. Luminar mentioned a prime need for Lidar in trucking is the false positives on the current systems, leading to as much trouble when an 18-wheeler suddenly stops while going 60 miles an hour.
Not So Expensive
LAZR stock has a $3.1 billion market cap now, so investors might think Luminar is expensive based on revenues only targeted at $86 million this year per analyst estimates. In reality, the company lists a forward contracted order book of $3.4 billion going to $4.4 billion this year and the stock valuation should be a multiple of this number.
As a reminder, larger investors bought Luminar for $10 when the company closed the SPAC deal back in 2021. Not to mention, Luminar is actually slightly cheaper now on a forward P/S ratio than Mobileye Global ( MBLY ).
Of course, the Luminar P/S multiple is likely understated due to some analysts still listing some aggressive revenue targets for 2024. Right now, the average analyst revenue estimate is up at $265 million and the company itself provided a more generic target of at least $160 million.
Either way, the valuation multiples of Luminar with 100%+ growth shouldn't approach the value assigned to Mobileye looking for a rebound into the 30% growth range. The major risk remains the cash balance level at $414 million and the high cash burn rate going into uncertain sales rates despite all of the production deals forecasted to launch soon.
Takeaway
The key investor takeaway is that Luminar is finally in breakout mode. The stock still trades below the going public transaction price and huge revenue growth to material levels likely sends Luminar even higher.
For further details see:
Luminar: Breakout Mode