Is Luminar Technologies Stock A Buy?

Luminar Technologies Inc (NASDAQ:LAZR) gained media buzz on the announcement that Apple (NASDAQ:AAPL) wants to build a self-driving electric vehicle. Because of that, the computer giant needs to source parts from vendors, and Luminar is a leading LiDAR maker.

With Apple potentially as a client, is Luminar Technologies stock a Buy?

It wasn’t fully confirmed, but Bloomberg cited several people familiar with the matter. The Apple Car wants to use LiDAR, and it’s seriously considering Luminar as its provider, although it’s also still courting offers from other potential vendors.

However, the probability is said to be high, and brings an equally high price tag. So, is Luminar Technologies a good investment?

Luminar Technologies: Bird’s Eye View

Luminar Technologies is an Palo Alto, California-based LiDAR sensor manufacturer. Not only that, but its technology is leading the market with the longest range, best resolution and performance, and least interference in the industry.

For the unfamiliar, light detection and ranging is a remote sensing technology. It differs from radar (which uses sound) by using light to generate a three-dimensional map of the surrounding area.

LiDAR data is combined with GPS, scanners, and other data to provide a three-dimensional topography map of the world around you. It’s the key feature that helps accurately determine where buildings, people, other cars, and potential obstacles and accidents could occur.

The sensors developed by Luminar can see over 250 visible meters with over 300 points-per-square-degree at 10 Hertz. It can do it in adverse weather with minimal interference from other LiDAR-equipped vehicles or even sunlight.

However, those limitations led Tesla (NASDAQ:TSLA) founder Elon Musk to declare the technology dead before automated cars even arrived. His vision for an automated future involves 360-degree cameras equipped with high-end artificial intelligence.

These competing visions have some investors wondering if Luminar Technologies is a good investment.

Is Luminar Technologies Stock A Buy?

Luminar Technologies had a market capitalization well over $6 billion in 2021. The company was valued at $1 billion before going public through a December 2020 SPAC merger that started at $6 billion and shot as high as $8 billion at one point.

Share prices were trading as high as $20.00 within months, and the company has about $600 million in cash provided from the blank check company involved in the merger as well as from private investors, including Peter Thiel and Nick Woodman.

CEO and founder Austin Russell became the world’s youngest self-made billionaire at the age of 25 from the merger. And Apple aside, the company has deals to integrate its $1,000 sensor technologies into vehicles from distinguished brands like Toyota (TM), Audi, and Volvo (which is also an early investor).

The company has a scalable operation to make automotive-grade products that are quickly being adopted throughout the industry. That doesn’t mean it’s going to be plain sailing.

Luminar Technologies Has Buzz But Will It Win?

Luminar Technologies may have the best technical specs on its sensors, but it doesn’t mean that they’re guaranteed to be the most successful company in the industry. Three other companies are in the race, and that’s just in the LiDAR space.

Velodyne Lydar, Valeo, and Innoviz are among the competitors also making deals with global vehicle manufacturers.

The biggest risk to investing in the company now is that it has already enjoyed a share price boost from the Apple news. Thereafter, the stock price slowly deflated, but it could enjoy another pop if/when the Apple news is confirmed and production starts.

The car won’t launch until 2025 at the earliest, and that means it’s more of a long-term play. Although Apple isn’t its only customer, any bad news related to that deal could quickly torpedo the stock and cause a mass exodus of short-term buyers.

And there’s the elephant in the room of Tesla (TSLA).

Can Luminar Technologies Competitors Win?

Tesla is one of the major companies working on autonomous vehicles and eschewing LiDAR. Founder and CEO Musk is publicly outspoken against the technology and finds it limited in scalability, despite early successes.

His belief is that the sensors are too expensive and unnecessary when GPS, radar, ultrasonic sensors, and even pre-existing digital maps exist. Artificial intelligence technology is reaching the point that it can monitor these existing sensors. And Musk points out the faults in LiDAR technology.

Video cameras and other sensors can see better in the dark, bright sunlight, and adverse weather conditions than LiDAR. And it’s less disrupted by other signal sources, making it a better technology in Musk and other engineers’ opinions.

AI technologists believe visual recognition is necessary for levels 4 and 5 autonomy in which self-driving cars truly reach their full potential. But LiDAR isn’t necessary for that transformation.

That doesn’t mean the technology is dead in the water. Auto manufacturers clearly see value in today’s real-world applications. It could be integrated into other systems, and it’s only over time when the kinks in automated driving systems will be overcome.

Is Luminar Technologies Stock A Buy? Summary

Luminar Technologies is a Silicon Valley LiDAR company that rose to prominence in early 2021 for its SPAC public offering. It is also at the center of rumors for being a sensor vendor to Apple and its autonomous EV Apple Car. This made the founder and CEO the youngest self-made billionaire in the world.

But investors jumping on may have a longer path to billions.

The Apple Car isn’t going to be released until 2025 at the earliest and could be delayed as long as 2027. And Tesla is going a different route with its navigation and self-driving technology.

Still, major automakers like Volvo, which invested in the company before it went public, are determined to bring the technology to the forefront of today’s self-driving roads.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.