2023-04-18 06:38:33 ET
Summary
- Luminar announces plans for another Lidar sensor factory to build another 600K sensors annually.
- The company already has a backlog of $3.4 billion with a forecast to reach $4.4 billion this year.
- LAZR stock is cheap trading near all-time lows despite continuing to line up new orders and building more factories to meet targets for 100% growth.
In a somewhat surprising announcement, Luminar Technologies ( LAZR ) is suddenly building a new manufacturing facility quickly after only recently opening a new factory in Mexico. The Lidar stock continues to trade weak due to limited near-term sales in a market still looking for contract verification. My investment thesis remains Bullish on the stock with the market ignoring the strong contract backlog in the Lidar sector.
Source: Finviz
Another Big Factory
In theory, Luminar wouldn't need a new factory unless the company has massive production orders officially in the works. The stock trades near the all-time lows due to the company only forecasting 2023 sales of ~$81 million based on the forecast for at least 100% sales growth.
Luminar has repeatedly bragged about a huge order backlog of $3.4 billion heading to $4.4 billion this year. The market has basically ignored these totals due to the lack of immediate revenues and fears these contracts can be easily cancelled by large auto OEMs.
The Lidar sensor company stacking high-volume factories on top of existing factories should provide some positive signals to the stock market. Luminar just brought online a new highly automated, high-volume manufacturing facility in Monterrey, Mexico already producing Iris sensors for global high-volume series production customers prior to vehicle launches.
The market mostly yawned as most of the Lidar companies only sell a few thousand sensors per quarter. The Mexico factory has initial capacity of up to 250,000 sensors per year expandable to 500,000 sensors per year with plans for future capacity expansion into the millions of sensors annually.
For this reason, the news of a new manufacturing facility in Asia capable of producing 600,000 Lidar sensors annually is a game changer. Luminar only needs this many sensors when production volumes are about to soar. Not to mention, the company is partnering with TPK, who plans to invest in Luminar via the purchase of stock.
The Volvo ( OTCPK:VOLVF ) launch of the EX90 Excellence vehicle in Shanghai with Luminar as standard equipment provides a prime example of why the company needs more sensor production capacity with a facility dedicated to Asia volumes. The company specifically points out the Mercedes-Benz ( OTCPK:MBGAF ) program award, along with the Volvo deal, as reason for needing an additional factory in Asia.
In essence, TPK has insight into the backlog and is willing to partner with Luminar to bring another factory online despite the company already having multiple facilities online. In total, the company has up to 1.1 million Lidar sensor production capacity from the Mexico factory just opened and the new Asia facility planned with TPK. At $1,000 a Lidar sensor, the total new capacity would generate over $1 billion in annual sales before additional expansion.
The company ended 2022 with a cash balance of $490 million. Luminar could definitely use a few hundred million dollars of additional cash to fund operations and development, though the announcement doesn't disclose any of the terms for TPK to invest in Luminar, whether public or not, and the amount.
Path To Major Revenues
While the market wasn't satisfied with Luminar guiding to 2023 revenues of only $81 million based on revenues doubling, the Lidar sensor sector was always set up for a massive ramp. The biggest question has always been whether major auto production deals would begin in 2024 or possibly not until 2026 or later.
Luminar reduced some of this debate with the new plans to implement Lidar as part of an ADAS package versus the need for full automated driving. As such, the Volvo EX90 vehicle in China will be equipped with cameras, radars and Lidar technology of Luminar to provide safety features, not full self-driving.
Analysts forecast massive revenue growth in 2024 and beyond supported by the plan to construct a new factory in 2023, considering the Mexico facility didn't even take a year to complete. The 2024 revenue forecast is for 205% growth to reach $271 million, but one analyst has revenue as low as $130 million.
The consensus forecast of only 4 analysts is for revenues to surge to $1.05 billion in 2026. The stock with a valuation of only $2.2 billion isn't factoring in any possibility revenues will reach this level while the company is still in massive growth mode through the end of the decade. Luminar lining up new production facilities suggest otherwise.
Takeaway
The key investor takeaway is that Luminar remains far too cheap with the massive opportunity ahead with Lidar moving into ADAS applications and ultimately shifting to the holy grail of autonomous driving. Investors should snap up the stock around $6 while the company makes steps towards series production.
For further details see:
Luminar: Full Speed Ahead