Tesla (NASDAQ:TSLA) is clearly accelerating in the car-making part of its business. The stock is now riding a $1 trillion high valuation on a strong quarter and massive contract with Hertz (OTCMKTS:HTZZ) for 100,000 vehicles. But, things are sputtering in Tesla’s Autonomous Driving department. But even as the EV maker’s safety imbroglio continued this week, one stock emerged as a potential winner: lidar player Luminar Technologies (NASDAQ:LAZR).
LAZR stock has been moving steadily upward, gaining 5% since the start of October. The buzz initially centered on a potential relationship between Luminar and EV upstart Lucid (NASDAQ:LCID). Now, with Tesla in even hotter safety waters, investors are starting to wonder if the EV giant will change its position on lidar technology and choose Luminar.
Here’s what happened.
Tesla Is in Hot Water… Can LAZR Stock Benefit?
This week, the U.S. National Transportation Safety Board (NTSB) hit Tesla hard. The agency, which makes safety recommendations, opened an investigation in August into 765,000 of Tesla’s U.S. vehicles after a series of crashes involving Tesla models and emergency vehicles.
The NTSB isn’t happy with Tesla, suggesting that the EV maker put its Full Self-Driving Beta technology in the hands of users ahead of properly vetting it for safety. As NTSB Chair Jennifer Homendy points out, the automaker did so before addressing “the very design shortcomings” implied in fatal crashes in Florida and California involving its Autopilot driver-assistance system. For context, FSD technology expands on Tesla’s Autopilot software with advanced safety features such as vehicle steering, accelerating and braking. As the agency points out, “despite Tesla’s characterization of FSD as ‘beta,’ it is capable of and is being used on public roads.”
Adding salt to the wound, the agency went on to disclose that Tesla provided only a partial response to an information request issued as part of National Highway Traffic Safety Administration’s formal safety investigation into the automaker’s autopilot technology.
Luminar: The Lidar Darling
Elon Musk has scorned lidar. Yet, despite what Musk thinks, the automotive lidar market is very real — and expected to grow at a 30% CAGR from 2019-2027. And on the heels of the NHTSA’s barbed comments, investors may be wondering whether Musk will be forced to change his tune now that Tesla faces even more scrutiny over whether cameras can truly deliver safe autonomous driving.
Tesla’s safety pain is clearly lidar’s gain. And the biggest lidar beneficiary is Luminar, which of all the lidar players is the only one to target “proactive safety” from the get-go. (For more details, see my Fireside Chat with Dr. Matthew Weed, Luminar’s senior director of product management).
Luminar has always been the pack leader in lidar, owing to its 1550nm technology and executive leadership. It also boasts several high profile relationships — most notably, with Volvo (OTCMKTS:VLVLY), which plans to put the company’s tech in its vehicles starting in 2022. Luminar has also signed deals with Pony.ai and Airbus (OCTMKTS:EADSY).
LAZR stock is hot for another reason. The company has been swirling in deal-related speculation. In May, a Tesla Model Y was spotted with what appeared to be Luminar’s lidar technology on its roof, suggesting Tesla may have been testing the company’s lidar tech on the down low. A savvy Redditor also spotted a Tesla Model S in the wild sporting Luminar tech.
The Bottom Line on LAZR Stock
With Luminar in lidar’s catbird seat right now, it’s no surprise that shares don’t come cheap. LAZR stock currently trades at a whopping 10x TTM price-to-book value, reflecting its market leadership status.
But with the stock having pulled back to just under $16, down from a peak of almost $38 in February, shares look much more attractive. That’s particularly true given its potential deal-related catalysts, strong balance sheet and impressive order book. (Although we can all quibble over what that order book actually means).
With Tesla’s safety issues propelling lidar technology back into the spotlight, Luminar could emerge a big winner.
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On the date of publication, Joanna Makris did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joanna Makris is a Market Analyst at InvestorPlace.com. A strategic thinker and fundamental public equity investor, Joanna leverages over 20 years of experience on Wall Street covering various segments of the Technology, Media, and Telecom sectors at several global investment banks, including Mizuho Securities and Canaccord Genuity.
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