Millions of People Will Be Blindsided in 2023. Will You Be One of Them?

On December 13, Louis Navellier, Eric Fry & Luke Lango will reveal the major events that could rock the markets in 2023. Will your money be safe?

Tue, December 13 at 4:00PM ET
 
 
 
 

Is the Honeymoon Over For Luminar Technologies?

After surging to a closing price of over $41 in the first five trading days after going public, shares of Luminar Technologies (NASDAQ:LAZR) have come  down to earth a bit. However after falling to a closing price of around $22, LAZR stock is rallying again.

an electric vehicle (EV) at a charging station representing EV stocks
Source: Alexandru Nika / Shutterstock.com

Yes, some of this is a bubble. 2020 has been the year when electric vehicle (EV) stocks have climbed to mercurial heights on nothing more than being an EV stock. Or, in the case of Luminar, by offering a technology that will be used by EV manufacturers.

With that said it’s unclear what 2021 will bring to the EV sector in general and companies like Luminar in particular. Is it time to go long on a company that is a leader in a technology that is slowly but surely coming of age? Or do you wait for the bubble to burst a little more and hope for a better entry point?

One reason that investors are excited about LAZR stock is that the company received its initial funding in 2012 from Peter Thiel of Palantir (NYSE:PLTR) fame (or notoriety depending on your disposition). Since its founding, Luminar has played a key role in bringing down the cost of LiDAR sensors, which is one of the obstacles for autonomous vehicle development.

Going All In on Autonomous Driving

LiDAR has more applications than autonomous driving. However that isn’t why the stock is priced at its current valuation. It’s also not the reason that Gores Metropoulos helped bring LAZR stock public. The current LiDAR bubble is about the potential growth to come from autonomous driving.

I’m a fairly creative person however I find it hard to envision exactly what the world will be like when autonomous vehicles are normative. But it seems like I’ll have a little longer to get my mind around that. In 2019, Bryan Reimer of Forbes acknowledged that a driverless future is a long time away. Said Reimer, “…the timeline to driverless technology changing how I live and move is probably in the order of several decades, if not further away.”

Over the summer, two additional studies supported this position. MIT researchers claim that Level 4 and 5 autonomous vehicles (even trucks) may be a decade away. And once they do hit the scene, the technology may be limited to specific regions of the country. Specifically, rural areas and areas that endure cold winter climates may have longer to wait.

And a study released in August from AAA makes the autonomous vehicle case even murkier. The study evaluated vehicles with Level 2 active driving assistance systems (ADAS). Level 2 means that the vehicles provide some limited assistance in acceleration, braking and steering. However, the study determined that these vehicles had some issue every eight miles over the course of 4,000 real-world driving miles.

Does any of this change the long-term narrative on autonomous driving? No but put together they make a compelling argument that LAZR stock is overvalued.

Luminar Has Competition

While Luminar appears to hold a competitive advantage with its existing LiDAR products, it is not alone in this market. And the company’s main competitor in this space, Velodyne (NASDAQ:VLDR) has existing relationships in the automotive industry that may make it a better investment in the short term.

However, Luke Lango pointed out that Luminar offers a best-in-class LiDAR solution. In terms of range, resolution, weather resilience, and cost Luminar comes out on top. Does that make it a certainty that Luminar will begin to capture market share from Velodyne? That remains to be seen.

Can You Commit to LAZR Stock?

LAZR stock is still overvalued. So if you’re thinking about taking a position you have to realize that the stock may be pricing in a lot of future revenue.

Thomas Niel emphasized the following point. The market is filled with investors who are bidding up stocks on what-might-be euphoria rather than on fundamentals. I agree with Niel’s assessment that going short on Luminar seems like a risk not worth taking.

At the same time, buying LAZR stock at its current level has a very speculative feel to it. If you’re going to buy Luminar understand that in every marriage, the honeymoon ends. At that point, it’s about commitment more than love. Make sure you’re willing to ride out Luminar for the long haul.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2020/12/lazr-stock-overvalued-but-speculative-investment/.

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