Even With This Drop Luminar Stock Is Astoundingly Overpriced

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Given the very high valuation of Luminar (NASDAQ:LAZR), investors should wait for a pullback in its LAZR stock before buying.

A finger hovering over an "autonomous drive" button.

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At this point, I recommend buying the shares of Luminar’s more attractive competitor, Velodyne (NASDAQ:VLDR), instead of LAZR stock.

Luminar has perhaps the highest valuation I’ve ever heard of for a company that’s already generating revenue; the shares are trading at 217 times the company’s own 2021 sales estimate.

Even based on Luminar’s likely very optimistic 2025 sales estimate of $537 million, which assumes that its revenue soars 55 times in just five years, the shares sport a hefty price-sales ratio of 10.5 times. And, despite these very high valuations, Luminar doesn’t expect to generate positive EBITDA until 2024.

Valuation and LSZR Stock

Northland Capital analyst Gus Richard expects 2025 global sales of lidar devices to auto companies to come in at $2.5 billion. Based on that estimate, Luminar’s 2025 revenue outlook assumes that it will capture more than 20% of the global sector.

Considering that companies based in other countries will probably soon start developing lidar devices and selling them in their home markets, Luminar’s 2025 sales estimate could very well be too high.

Meanwhile, short-selling firm Citron Research earlier this month wrote that LAZR stock had no chance of rising meaningfully above $40 and predicted that it would fall back to $20. That call almost proved to be a good one, as the shares dropped from their all-time high of $47.80 to around $22.80 before recently rebounding to around $26.

Citron’s assessment indicates that the shares are unlikely to rise much more than 50% from their current levels, while they can easily drop 30%. That’s not what I would call a great risk-reward ratio.

Velodyne Looks Better

When, in early October, I wrote a bullish column on Gore Metropoulos, the SPAC that eventually merged with Luminar, my thesis was that r was revolutionizing lidar because of the cheapness of its offerings.

Also worth noting, however, is that Gore’s shares were changing hands for only about $0.50 on Oct. 7, the day that the article was published.

But in mid-November, Velodyne, which had been previously known for its very expensive lidar offerings, unveiled new solid-state lidar sensors called the H800.

According to Forbes, the H800 will have “a target price of just $500. ”  The publication explained that the product is relatively easy  to manufacture automatically, making it cheaper for Velodyne to make. At that price, the H800 will certainly be inexpensive enough to add to all higher-end automobiles and most middle-range ones.

Meanwhile, according to Highways Today the Velarray is better at detecting objects around on curves and slopes at a range of 200 meters, giving it safe stopping distances in highway driving.

And further validating the H800 and its technology, Ford’s (NYSE:F) European commercial-vehicle unit, Ford Otosan, has already announced that it plans to deploy the Velarray H800 in its vehicles.

Velodyne’s annual revenue is estimated to have reached $100 million, putting it well above Luminar in that category. Moreover, Velodyne has close, advanced partnerships with Ford, China’s Baidu (NASDAQ:BIDU) and Hyundai Mobis (reportedly “the world’s seventh largest auto parts maker).

That appears to trump Luminar’s close, advanced partnerships with Volvo (OTC:VLVLY), Intel’s (NASDAQ:INTC) Mobileye (that alliance may prove to be fragile over the longer term) and Daimler Trucks.

Finally,  with its efforts to target the robotics sector as well as automobiles, Velodyne is much more diversified than Luminar. That could prove to be important, as multiple, other strong contenders are entering the automobile lidar sector.

The Bottom Line on LAZR Stock

Despite Velodyne’s multiple key advantages over Luminar,  the latter company’s market capitalization is $5.65 billion, versus just $3.4 billion for Velodyne.

Given these points, I would advise investors to buy Velodyne’s shares and wait for Luminar’s shares to fall meaningfully below $20 before acquiring them.

On the date of publication, Larry Ramer held a long position in Velodyne. 

Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.


Article printed from InvestorPlace Media, https://investorplace.com/2020/12/investors-should-wait-for-a-pullback-before-buying-lazr-stock/.

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