Shares of Luminar (NASDAQ:LAZR) stock closed lower by more than 6% today. Yesterday, the light detection and ranging (lidar) company officially joined the Russell 2000 Index. As a result, the index and any of its derivatives — like the iShares Russell 2000 (NYSEARCA:IWM) exchange-traded fund (ETF) — are expected to purchase roughly 30 million shares.
Luminar boasts several established automakers like Nissan (OTCMKTS:NSANY), Mercedes Benz (OTCMKTS:DLMRY) and Volvo (OTCMKTS:VLVLY) as customers. In total, the company serves more than 50 commercial partners and eight out of ten of the world’s top automakers. Its advanced lidar uses pulsed laser lights to measure variable distances and generate a 3D image of surroundings in range. Many see this technology as key to advancing autonomous driving (AD).
The Russell 2000 tracks the 2,000 smallest companies based on market capitalization in the Russell 3000 Index. Companies in both indices receive increased exposure and liquidity. In addition, the Russell 2000 is often referred to as a benchmark for small-cap companies.
There doesn’t seem to be any company-specific news to explain LAZR stock’s decline today. However, the Nasdaq Composite did close lower by about 3%, putting pressure on many technology companies.
LAZR Stock Falls Lower After Joining the Russell 2000 Index
LAZR stock has declined by over 60% year-to-date (YTD). Despite the steep decline, however, CEO Austin Russell remains confident in Luminar, as evidenced by his insider purchases. Russell has purchased shares on nine separate occasions this year, the most recent purchase occurring on May 11. On that day, the CEO bought 300,000 shares at an average price of $8.65 per share. In total, the transaction amounted to $2.59 million.
After the purchase, Russell now owns a total of 755,000 shares. Russell owned zero shares of the company up until he first bought 65,000 shares on Jan. 21.
So, how does Wall Street feel about Luminar’s prospects? LAZR stock has an average price target of $18.69 among 13 firms with coverage of the company. The average price target implies upside of more than 175% from today’s close.
Jefferies analyst David Kelley is bullish on LAZR stock, with a price target of $20. Kelley views the company as an “emerging LiDAR leader” with a growing order pipeline. Last year, Luminar’s pipeline exceeded $2 billion, demonstrating year-over-year (YOY) growth of 61%. Kelley forecasts a five-year compound annual growth (CAGR) rate of 124% and expects breakeven profitability by 2024.
On the date of publication, Eddie Pan did not hold (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.