Please ensure Javascript is enabled for purposes of website accessibility

Why Luminar Technologies Stock Was Up Thursday

By Brett Schafer - Jun 24, 2021 at 2:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A large car manufacturer announced it will be using the start-up's technology.

What happened

Shares of Luminar Technologies (LAZR 0.64%) were rising Thursday as Volvo announced it would be using the start-up's lidar technology on its upcoming electric SUV. Shares were up as much as 12.8% on the news. The stock is up around 7.4% as of 1:17 p.m. EDT.

A car driving with digital grid lines all around it.

Image source: Getty Images.

So what

Luminar Technologies is an early-stage company, so securing contracts with large automakers like Volvo is a big deal for the potential viability of its products. Lidar, which stands for Light Detection and Ranginguses lasers and pulsing light that enables computers to sense the world around them and create intricate 3D maps. The technology is popular for autonomous-vehicle research, which is why Volvo is partnering with Luminar on this deal.

According to Luminar's press release, its hardware systems will be on Volvo's fully electric successor to the XC90 SUV. This next-generation SUV is supposed to be unveiled sometime in 2022. An unveiling doesn't mean production will happen right away since manufacturing cars is a lengthy process. In other words, the technology might not be hitting city streets for a few years.

Now what

While getting these big contracts is important for Luminar's future, investors should remember that this company is still in the very early stages and only had $15 million in revenue over the last twelve months. With a market capitalization of $8 billion after today's jump, the stock has a price-to-sales ratio (P/S) in the triple digits, which implies a lot of future growth is already priced in. Getting a contract from a big manufacturer like Volvo is great progress, but investors should remember that Luminar Technologies is an extremely risky stock at the moment. They should proceed with caution before buying shares in this start-up.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Luminar Technologies, Inc. Stock Quote
Luminar Technologies, Inc.
LAZR
$11.06 (0.64%) $0.07

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.