Luminar CFO defends lidar maker’s pricing and income within the wake of a Goldman downgrade

Lidar maker Luminar Applied sciences, stung by a current Wall Avenue downgrade, is responding in an uncommon means: taking its case on to the shareholders.

In a letter seen by CNBC on Friday morning, Luminar CFO Tom Fennimore – himself a former Goldman Sachs managing director – takes subject with arguments made in a bearish be aware by Goldman analyst Mark Delaney earlier this week.

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Delaney on Tuesday afternoon reduce Goldman’s ranking on Luminar to promote, from maintain, arguing that its shares are overpriced relative to key opponents and that Luminar’s personal pricing assumptions are unrealistically excessive.

Luminar’s shares have fallen about 16% since Delaney’s be aware was printed.

“We proceed to see Luminar as certainly one of a handful of leaders within the very aggressive lidar trade,” Delaney wrote. “Nevertheless, we see draw back to the corporate’s margin outlook with the corporate concentrating on income per automobile of ~$1k which we consider implies ASPs [average selling prices] roughly 50-100% increased than key opponents.”

Merely put, whereas Delaney acknowledges that Luminar is certainly one of just a few lidar makers profitable offers with main automakers, he thinks that Luminar will not be capable to get the costs it is hoping to get from these automakers. And primarily based on 2025 income assumptions, he sees Luminar buying and selling at 4 instances the valuation of opponents Innoviz and Hesai, each of which have additionally received enterprise from automakers.   

Fennimore argues that Delaney missed two key factors.

“One, our tech is best, and other people sometimes pay a premium for tech, however to us this is not a theoretical train: That is pricing that we even have in place,” Fennimore informed CNBC in an interview on Friday morning.

Fennimore’s letter factors out that Luminar has already signed contracts to offer {hardware} and software program for over 20 upcoming new autos from main automakers together with Volvo, Polestar, Mercedes-Benz and Chinese language auto big SAIC Motor. These contracts lock in pricing via the lifetime of these upcoming fashions, he mentioned.

“‘Premium pricing’ is not a theoretical idea we’re forecasting, however an achievement we’ve got already made in our main buyer contracts,” Fennimore wrote within the shareholder letter.

And the second level Fennimore says Goldman missed: The time-frame Delaney selected to check Luminar’s valuation towards these of its rivals.

“We consider utilizing 2025 income as a valuation benchmark versus friends dramatically undervalues Luminar, as most of the 20+ automobile traces we’ve got been awarded should not anticipated to achieve manufacturing till past 2025,” he wrote.

Put one other means, a few of the massive contracts that Luminar has already signed will not generate important income till these autos launch within the second half of the last decade, Fennimore mentioned.

The choice to take the rebuttal on to Luminar’s shareholders is uncommon, however Fennimore believes it is warranted – and he hinted that Luminar may select to ship extra letters like this sooner or later.

“At any time when anyone raises legitimate and considerate considerations about us, we wish to reply with legitimate and considerate info,” Fennimore informed CNBC. “As a result of I feel the capital markets depend on having a very good and factual debate.”