Set Your Sights on Luminar Without Getting Burned

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If you’re looking for a big-time growth opportunity in 2021 and beyond, Luminar (NASDAQ:LAZR) should be on your radar. But if you’re looking to park LAZR stock in your portfolio, laser-like focus on the stock chart and a well-aligned options strategy are optional investment equipment to get friendly with.  Let me explain.

A graphic showing a car driving down a snowy road with its lidar scanning the surroundings.

Source: Oskari Porkka/ShutterStock.com

So, who or what is LAZR? Luminar is a recent SPAC (special purpose acquisition company) and technology startup which specializes in “light detection and ranging” technology, known as “lidar” for short. The company’s science is aimed at the autonomous or self-driving vehicle market. And lidar promises to be critical to making that dream a safe reality — with huge growth prospects in tow.

In a nutshell, lidar allows cars to see and respond to their immediate environment. As InvestorPlace’s Luke Lango explains, this is made possible by shooting laser beams and measuring their return paths. I’ll take his word the technology works. I’m still working on using a VCR.

More importantly, the industry is giving Luminar more than just lip service.

As Louis Navellier noted recently, Luminar has already scored more than 50 industry partners including seven of the top 10 global automotive OEMs (original equipment manufacturers). It’s the kind of traction to make LAZR a top player, if not the biggest, in the space. And with the global market for lidar devices estimated to reach $2.5 billion by 2025 according to Northland Securities, that could be a certain boon for LAZR.

But what about today — or even tomorrow, for that matter — as an investment as we enter 2021?

LAZR Stock Daily Price Chart

Luminar (LAZR) triangle forming
Source: Charts by TradingView

Today, even Northland sees LAZR as expensive. Well, kinda. At the stock’s recent all-time high the brokerage cut shares to “market perform.” That’s Wall Street’s way of saying “hold” without getting in trouble with potential business. It’s valued at 6x the expected valuation of the whole automotive lidar market by 2025. Given that, LAZR stock couldn’t be justified for anything stronger than a hold rating and a more-or-less market price target of $41 a share.

Maybe Northland should have warned anyway with a “sell” rating on Luminar? Right around the same time, well-watched short-seller Citron Research came out with a stern worse-than-a-casino warning on shares, stating LAZR was a “suckers game” with the stock fetching around $40.

Within a week of Citron’s bearish call, the stock cratered roughly 40% to touch $22.32 on Dec. 15. The decline was helped by word Intel’s (NASDAQ:INTC) Mobileye would be going with in-house lidar sensors for its self-driving car systems in 2025. If true, that would also end its relationship with Luminar. The price action and story was enough to find Northland countering its position on shares. Well, kinda.

The brokerage’s second go was to defend shares a bit less cautiously. LAZR was raised to “outperform.” Analyst Gus Richards believes the capabilities, supplier relationship and Intel’s priorities suggest Luminar won’t be displaced. That being said, the firm’s price target of $41 didn’t budge.

It turned into a nice swing trade for Gus’ followers. But after a couple weeks and a gain of about 35%, where’s that leave today’s LAZR stock investors? At the moment and entering 2021, the entirety of the back-and-forth between bulls and bears has resulted in a volatile triangular pattern.

For now, with shares situated near the formation’s apex and a supportive-looking stochastics setup, I’d wager the price action could turn into a continuation breakout play above resistance near $36.50. However, if a breakout was to enter the picture, my money would be on a slightly out-of-the-money and near-term bull call spread rather than eyeing shares as a core stock holding.

On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100%  the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2021/01/set-your-sights-on-luminar-without-getting-burned/.

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