What happened
On a morning when the S&P 500 was inching higher, Luminar Technologies (LAZR -4.20%) moved swiftly in the opposite direction. Investors were paring their positions in response to a downgrade of the lidar company's stock and a new price target that implies significant downside.
As of 11:59 a.m. ET Wednesday, shares of Luminar were down 11.7%, recovering somewhat from an earlier decline of 15.8%.
So what
Concerned with the company's margins, Goldman Sachs downgraded Luminar's stock to sell from neutral, and reduced its price target on the shares to $5. Based on Luminar's closing price on Tuesday of $7.80, that new price target implies a downside of about 36%. Goldman Sachs initiated coverage on Luminar's stock in February 2022 with a neutral rating and a price target of $14.
While Goldman Sachs is bearish on the stock, other analysts have recently expressed optimism regarding it. Two weeks ago, JPMorgan and Deutsche Bank set price targets on it of $20 and $14, respectively.
Now what
During a business update provided in late February, Luminar stated that it believes it will achieve a positive gross margin by the fourth quarter. It seems Goldman Sachs is skeptical about this projection, however. For context, Luminar reported a gross loss of $16.6 million in Q4 2022, a poorer result than the gross loss of $7.5 million that it booked for Q4 2021.
Considering the company's recent performance, investors would be wise to exercise caution rather than blindly taking management's gross profit forecast at face value. Instead, they should look for data in its upcoming quarterly earnings reports that confirms that this lidar company is driving in the right direction.
