Riding the coattails of two very voguish 2020 trends – SPAC mergers and new vehicle tech – it has taken Luminar Technologies (LAZR) no time at all to make its presence felt in 2020’s bubbly stock market. The lidar maker shot out of the gates on December 3 with shares more than doubling over its first week as a publicly traded company.
But buzzy stocks are prone to wild swings of volatility and the stock pulled back following the surge. The selloff appeared to conclude on Tuesday with a violent 18% drop after investors got spooked by some seemingly unfavorable comments.
Mobileye’s CEO said in an interview that the company’s 2025 plans for a self-driving car could come with inhouse-built lidar sensors instead of the ones made by Luminar.
So, evidently investors were dismayed by the statement, especially since only last month, Luminar signed on the dotted line with Mobileye to supply lidar for its 1st generation Robotaxi.
However, Northland analyst Gus Richard says it all amounts to a storm in a teacup.
The 5-star analyst lists several reasons why the CEO’s comments should be taken with a grain of salt: “1) We do not believe an internal lidar system could be ready for 2025 production. 2) LAZR will be the entrenched supplier to Mobileye by that time. 3) Intel is developing lidar, and we believe INTC’s SiP group has other priorities. 4) If Mobileye had an internal solution ready to go they would not have announced a deal with LAZR.”
Intel – which owns Mobileye – has for several years been focused on developing lidar, via its Silicon Photonics (SiP) unit. However, Richard says, “It is an R&D project.”
Richard estimates that in order to develop an auto-grade lidar system fit for purpose in a level 4 or level 5 autonomous vehicle, it would take Intel 5 years and cost between $500 million to $1 billion.
Considering Intel’s recent woes, the analyst is skeptical the company would dedicate so much capital and resources toward such an endeavor.
Additionally, once Luminar’s product is “integrated with Mobileye’s software stack in initial autonomous cars it will be difficult to rip out.”
“Intel has bigger problems,” Richard concluded, “And SiP is one of the technologies that could help them regain a competitive edge in its core microprocessor business.”
Richard puts his money where his mouth is, upgrading LAZR from Market Perform (i.e. Hold) to Outperform (i.e. Buy). The analyst suggests that if everything goes as planned, LAZR will be a $41 stock in the next 12 months, implying 68% return.
Some stocks fly under the radar, and LAZR is one of those. Richard’s is the only recent analyst review of this stock, and it is decidedly positive.