A Mercedes-Benz truck retrofitted with various types of lidar systems, including Luminar’s Iris, to showcase the differences in technologies.
Lidar maker Luminar Technologies, battered by a recent Wall Street downgrade, is responding in an unusual way: taking its case directly to shareholders.
In a letter seen by CNBC on Friday morning, Luminar’s CFO Tom Fennimore — himself a former managing director of Goldman Sachs — disputed arguments made in a bearish note by Goldman analyst Mark Delaney earlier this week.
Delaney on Tuesday afternoon cut Goldman’s rating on Luminar for sale, from hold, arguing that its shares are overvalued compared to major competitors and that Luminar’s pricing assumptions are unrealistically high.
Luminar shares are down about 16% since Delaney’s memo was published.
“We continue to see Luminar as one of a handful of leaders in the highly competitive lidar industry,” Delaney wrote. “However, we do see a downside to the company’s profit margin outlook as the company is targeting revenue per vehicle around $1,000, which we believe is implied by ASP users. [average selling prices] Approximately 50-100% higher than the main competitors.
Simply put, while Delaney admits that Luminar is one of the few lidar makers to win deals with major automakers, he believes Luminar won’t be able to get the prices he hopes to get from those automakers. And based on revenue assumptions for 2025, it sees Luminar trading at four times the valuation of competitors Innoviz and Hesai, both of which have also won business from the automakers.
Fenimore argues that Delaney missed two key points.
“First, our technology is better, and people usually pay a premium for technology, but for us this is not an exercise in theory: this is the price we actually apply,” Fenimore told CNBC in an interview Friday morning.
Fennimore’s letter notes that Luminar has already signed contracts to provide hardware and software for more than 20 upcoming new vehicles from major automakers including Volvo, Polestar, Mercedes-Benz and Chinese auto giant SAIC Motor. Those contracts, he said, maintain prices throughout the life of those upcoming models.
“‘Premium pricing’ is not a theoretical concept we would expect, but an achievement we have already achieved on our major customer contracts,” Fenimore wrote in the contributor letter.
The second point that Fenimore says Goldman missed: the time frame Delaney chose to compare Luminar’s valuation to that of its competitors.
“We believe that using 2025 revenue as a yardstick for evaluating against peers significantly undervalues Luminar, as many of the vehicle lines awarded beyond 2025 are not expected to reach production until 2025,” he wrote.
In other words, some of the large contracts Luminar has already signed won’t generate significant revenue until these vehicles are launched in the second half of the decade, Fennimore said.
The decision to take the appeal directly to Luminar shareholders is unusual, but Fennimore thinks it’s justified — and hinted that Luminar may choose to send more letters like this in the future.
“When anyone raises valid and measured concerns about us, we want to respond with valid and considered facts,” Fenimore told CNBC. “Because I think the capital markets depend on having a good, factual debate.”
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