Luminar (NASDAQ:LAZR) will certainly garner a lot of attention because of what it does, but LAZR stock will only move higher based on whom it’s doing it for.
Luminar manufactures LiDAR (Light Detection and Ranging) units, which is why it’s getting the attention of EV enthusiast investors. LiDAR creates a three-dimensional picture of surroundings using laser technology, and LiDAR is a guidance system being applied to autonomous vehicles
Luminar does have a chance to make strong gains as it has the right connections, but Luminar also has competition.
LAZR Stock and the SPAC Merger
Investors should note two points of strength that Luminar has as the result of merging with special purpose acquisition company (SPAC) Gores Metropoulos.
Firstly, Luminar is flush with cash. According to its website, the company received approximately $590 million total cash after the merger, including $406 million from Gores Metropoulos and $184 million in proceeds from the merger itself.
That means investors should evaluate LAZR stock as a SPAC from a business development perspective. Luminar has money. So now the question is what kind of relationships and revenues can it derive from that capital position?
Luminar looks to be competing in an area that is set to receive serious investor attention. EVs, and particularly SPAC-funded EVs, received massive investment in 2020. Investment capital looks likely to focus on EV suppliers as the electric vehicle environment is becoming saturated.
While many nameplates made headway in 2020, there was a sense of consolidation as 2021 arrived. Leading names look likely to stay where they are with many of the SPAC EVs scrambling and clawing for position in the next few years.
It wouldn’t be a stretch to imagine that a large majority of the SPAC-funded EVs that came to market in 2020 will fail. Because of this, investors are going to look outside of EV manufacturers and into EV suppliers.
That’s a boon for companies like Luminar. Investors still want to place capital in EVs, but the gains aren’t as lucrative in EV manufacturers. Suppliers like Luminar naturally become more attractive as investment targets. Luminar has a strong position and should have one overarching goal.
Investors are keen to know anything and everything about LiDAR and vehicle autonomy, so it is clear that Luminar will garner lots of interest as a LiDAR manufacturer. Luminar’s position is strong, so it has to execute.
It’s critical that Luminar builds revenue-driving relationships. Fortunately, Luminar has an order book which stands at $1.3 billion. Luminar already had established 50 commercial partnerships at the time of the SPAC commencement. Further, Luminar has established a strategic partnership with Daimler AG (OTCMKTS:DMLRY). An investment in Luminar now is a bet that strong revenue can flow from those relationships.
And we can imagine that a good portion of the funding from the deal will be directed toward building those commercial partnerships into revenue generating ventures.
Luminar has already made strides in developing those partnerships. Just recently Luminar announced that it was making collaborative datasets publicly available.
Volvo (OTCMKTS:VLVLY) collected large sets of data from its Luminar LiDAR project, and the two companies have decided to make those results available to the public. While the immediate revenue implications are unclear, it does indicate that Luminar values the development of the sector at large.
Luminar has a lot of potential as an investment. But there are other names in the LIDAR space for comparison. They include Velodyne Lidar (NASDAQ:VLDR) and Collective Growth Corporation (NASDAQ:CGRO). And while they’re all early in their existence, all three have the potential to explode.
Collective Growth Corporation is a lot like Luminar. It is also a SPAC focused on LiDAR for autonomous vehicles. Velodyne Lidar is taking a broader approach to the LiDAR market. It is focused on developing LiDAR solutions across end applications as diverse as robotics, drones, and smart cities in addition to autonomous vehicles.
Luminar stands out because it is ahead of Collective Growth in that it has already merged. And I like it more than Velodyne for its focus on vehicle autonomy.
That’s what makes Luminar worthwhile now. It has established relationships, it’s flush with cash and it has orders to fulfill. It is certainly speculative, but I believe it has too much potential and positive momentum to ignore now.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.