It’s been crazy out there in the market. So things with Luminar Technologies (NASDAQ:LAZR) seem relatively tame by comparison. LAZR stock is up nearly 10% for the year.
However, at one point, the stock was up over 19%. Still, that seems pretty typical of stocks in the electric vehicle sector.
Luminar went public via a special purpose acquisition company (SPAC) in late 2020. As you know, 2020 was the year when the acronym SPAC became a household name among investors. Luminar was not the only company that was part of the EV sector to go public via a SPAC.
The reason is simple, getting to the EV future that many businesses (and the federal government) envision is going to take enormous amounts of capital. And as the market kept moving higher in 2020, many small, private businesses used a SPAC as a way to quickly get to market.
Going public via a SPAC is (or was) considered riskier than a traditional initial public offering. A traditional IPO requires companies to go through far more scrutiny. With a SPAC, a company only has to find one firm to buy. And in fairness, some of these SPACs went public on little more than a wink and a smile.
Luminar is different. The company is developing the lidar technology that will power the emerging autonomous vehicle movement. And while the company has more applications for lidar than autonomous vehicles, the interest from investors is clearly about the company’s role in that sector’s growth.
The Electric Vehicle Revolution Is Coming
I’m not going to argue with the federal government. When the feds say they’re going to electrify more than 600,000 vehicles, I believe it. However, that’s not the same as having autonomous vehicles. An MIT study says it will take at least a decade before Class 4 or Class 5 (i.e. vehicles capable of supporting autonomous vehicles) are available.
I cited that study in a prior article about Luminar Technologies. As well as 2019 comments from Bryan Reimer who in an interview with Forbes acknowledged that a driverless future is a long time away.
“[T]he timeline to driverless technology changing how I live and move is probably in the order of several decades, if not further away,” Reimer said.
LAZR Stock Is a Good Investment
Investing in LAZR stock is a long play that is similar to the 5G revolution. While stocks like Apple (NASDAQ:AAPL) and Verizon (NYSE:VZ) may be benefiting now, it was semiconductor companies before that. And there were a number of other small-cap stocks before that.
So here’s a novel thought when it comes to LAZR stock; listen to the analysts.
Considering the events going on in the market, I know this is a radical thought. But the analysts are typically accurate, and the most bullish among them have a price target for LAZR stock of around $40. Granted that’s a gain of nearly 15% from its current level. However, the consensus estimate is for the stock to gain only about 6% over the next 12 months.
The analysts aren’t taking the punch bowl away because they want it for themselves. They’re doing so because Luminar Technologies may have the best lidar system in the whole wide world. But autonomous vehicles are years away, probably more than a decade away.
Add that to the idea that the market is starting to feel a little frothy at the moment and you have a recipe for LAZR stock to move lower. So here’s what I think you do. You look at a price of $40 as your ceiling. And when you get the stock dropping like this, you add to your position. And then you wait.
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 seven years. He has been writing for Investor Place since 2019.