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Why Luminar Stock Tanked Today

By Evan Niu, CFA - Dec 23, 2020 at 1:20PM

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Baird initiated coverage on the lidar specialist with a neutral rating and a price target below current levels.

What happened

Shares of Luminar ( LAZR -4.54% ) tanked as much as 12% today after getting a lukewarm initiation from Wall Street. Baird kicked off coverage on Luminar with a neutral rating and $30 price target. The stock has recovered some of those losses and was down just 5% as of 12:55 p.m. EST.

So what

Analyst Tristan Gerra believes that the lidar technology specialist faces execution risks ahead, which makes it a somewhat speculative play on the lidar market. Lidar sensors are a core component of many autonomous vehicle projects that are currently in development. A Reuters report earlier this week that Apple is moving forward with its electric vehicle project and planning to tap third-party lidar suppliers caused shares of lidar companies including Luminar and rival Velodyne to surge.

Red stock chart going down

Image source: Getty Images.

Baird suggests that Luminar will have a stronger position in the market as the auto industry makes progress on autonomy, particularly once the technology reaches Level 3 or Level 4. Lidar will be necessary to achieve Level 5 autonomy, in Gerra's view.

Now what

Considerable uncertainty remains regarding the development of autonomous cars, which makes it difficult to accurately forecast Luminar's revenue. The company went public earlier this month after closing its merger with a special purpose acquisition company (SPAC), and provided investors with optimistic forecasts.

Revenue is expected to be approximately $15 million this year, and Luminar expects to grow sales to $837 million by 2025. Gerra is somewhat skeptical about that outlook due to "unproven manufacturing capabilities, performance in adverse weather conditions, timing of adoption, pricing, and potential vertical integration."

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Stocks Mentioned

Luminar Technologies, Inc. Stock Quote
Luminar Technologies, Inc.
$16.83 (-4.54%) $0.80
Apple Inc. Stock Quote
Apple Inc.
$160.24 (2.19%) $3.43
Velodyne Lidar, Inc. Stock Quote
Velodyne Lidar, Inc.
$5.52 (-2.65%) $0.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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