2023-11-09 18:24:02 ET
Summary
- Luminar Technologies, Inc. faces production start delays at a key partner that limited revenue ramp in 2023.
- The Lidar company was hit by multiple project delays in the last quarter, contributing to a Q3 2023 miss, though revenues should surge in Q4.
- The stock trades at a massive discount to the order book with a market cap of only $1.2 billion, making Luminar stock a speculative buy.
The Lidar sector faces a volatile ramp path due to the implementation of new technologies into auto production requiring years of testing and unpredictable new vehicle launches. Luminar Technologies, Inc. ( LAZR ) is the latest company to get snarled in production start delays of a major auto manufacturer. My investment thesis remains ultra Bullish, with the stock selling off towards the lows despite a massive order book and great progress towards production ramps.
Another Step Forward
Luminar was famous for recently promoting 100% growth rates, but the company ran into problems with key partner AB Volvo (publ) ( VOLVF ) pushing back production of their new SUV with an Iris sensor. Volvo was supposed to launch the EX90 in China in 2023, but the auto manufacturer ran into software issues, now pushing back the global launch to an undetermined time in 1H'24
The Lidar company only reported Q3'23 revenues of $17.0 million, below prior guidance of $18.0 to $21.0 million. Luminar is now guiding to 2023 revenue of $75.0 million leading to a still big Q4 as follows:
- Q4E - $27.3 million.
- Q3A - $17.0 million.
- Q2A - $16.2 million.
- Q1A - $14.5 million.
The Q3 shortfall is blamed on two primary factors. First, two new contracts that were expected to be signed during Q3 slipped into Q4. Second, an incremental increase in Iris+ development man-hours and related costs slowed the timing of revenue recognition for associated development contracts.
Ultimately, the biggest impact to financials during 2023 is the Volvo delay of the EX90, though this start of production delay didn't directly impact the updated Q3 numbers versus guidance. Luminar recently passed the Run at Rate production audit, setting the Iris Lidar for global launch with the EX90 in 2024.
Despite all of the disappointment, Luminar is still guiding to Q4'23 revenue of $27.3 million, up substantially from only $17.0 million in the just-reported September quarter. The company is ramping up capacity at the Mexico facility, with plans to reach capacity at up to 250K units a year.
Luminar has not deterred from the forecast to end the year with a backlog of $4.4 billion. In addition, the Lidar company has long claimed the backlog in 2030 would be in the $60 billion range with minimal market penetration, and the CEO maintained this number on the Q3'23 earnings call as follows (emphasis added):
...we said by the end of the decade, ultimately the target would be to get towards, $60 billion , contracts, for the order book which is in terms of the respective opportunity that we have ahead of ourselves by you know capturing what that was like 3% or 4% market penetration.
The market has lost interest in back orders just as the industry is in full ramp mode. Peer Innoviz Technologies Ltd. ( INVZ ) more than doubled quarterly sales in Q3 and forecast Q4 revenues triple again sequentially to reach at least $9 million.
No Confidence
The good news is that Luminar forecasts ending 2023 with $300 million in cash . The guidance has operating cash flow burn dipping to $30 to $35 million during Q4, leaving the Lidar company with plenty of cash to reach profitability by the end of 2025.
Luminar forecasts Q4'23 gross margins turning positive in an initial positive sign the company will spend 2024 substantially cutting the cash burn on a quarterly basis as sales ramp up. The company has additional deals with Mercedes-Benz Group AG ( MBGAF ) and Polestar Automotive Holding UK PLC ( PSNY ), including the deal announced today with partner Mobileye Global Inc. ( MBLY ) for the Polestar 4 with the Mobileye Chauffeur system.
The stock has collapsed to nearly $3 for a market cap of only $1.2 billion. The market is far too nervous about the backlog figures, and Luminar should be bought based on a multiple of the backlog, not the limited current sales.
Takeaway
The key investor takeaway is that Luminar Technologies, Inc. remains a cheap stock based on the opportunity ahead in Lidar. The market has no confidence in the business, but this is sometimes the best opportunity to buy a market leader.
Investors should use this weakness to further build up a position in Luminar shares, though the stock price could fall to lower levels, if the recent low at $3 doesn't hold.
For further details see:
Luminar: Focus On Progress, Not Volvo Delays