Luminar CFO defends the lidar manufacturer’s prices and earnings
A Mercedes-Benz van retrofitted with different types of lidar systems, including Luminar’s Iris, to showcase the differences in the technologies.
Michael Wayland/CNBC
Lidar maker Luminar Technologies, stung by a recent Wall Street downgrade, is responding in an unusual way: taking its case directly to shareholders.
In a letter seen by CNBC on Friday morning, Luminar CFO Tom Fennimore — himself a former CEO of Goldman Sachs — takes issue with arguments made in a bearish note by Goldman analyst Mark Delaney earlier this week.
Delaney on Tuesday afternoon cut Goldman’s rating on Luminar to sell, from hold, arguing that the shares are overpriced relative to key competitors and that Luminar’s own price assumptions are unrealistically high.
Luminar’s shares have fallen about 16% since Delaney’s memo was published.
“We continue to see Luminar as one of a handful of leaders in the highly competitive lidar industry,” Delaney wrote. “However, we see downside to the company’s margin outlook with the company targeting revenues per vehicle of ~$1k, which we believe implies ASPs [average selling prices] approximately 50-100% higher than key competitors.”
Simply put, while Delaney acknowledges that Luminar is one of only a few lidar manufacturers to win deals with major automakers, he believes that Luminar will not be able to get the prices it hopes to get from those automakers. And based on 2025 revenue assumptions, he sees Luminar trading at four times the valuation of rivals Innoviz and Hesai, both of which have also won business from automakers.
Fennimore argues that Delaney missed two key points.
“First of all, our technology is better, and people usually pay a premium for technology, but for us this is not a theoretical exercise: These are prices that we actually have in place,” Fennimore told CNBC in an interview Friday morning .
Fennimore’s letter points out that Luminar has already signed contracts to supply hardware and software for over 20 upcoming new vehicles from major automakers including Volvo, Polestar, Mercedes-Benz and Chinese auto giant SAIC Motor. Those contracts lock in prices through the life of the upcoming models, he said.
“‘Premium pricing’ is not a theoretical concept we predict, but an achievement we have already achieved in our major customer contracts,” Fennimore wrote in the shareholder letter.
And the second point Fennimore says Goldman missed: the time frame Delaney chose to compare Luminar’s valuation with that of its rivals.
“We believe that using 2025 earnings as a valuation versus peers dramatically undervalues Luminar, as many of the 20+ vehicle lines we have been assigned are not expected to reach production until after 2025,” he wrote.
Put another way, some of the big contracts Luminar has already signed won’t generate significant revenue until those vehicles launch in the second half of the decade, Fennimore said.
The decision to take the rebuttal directly to Luminar’s shareholders is unusual, but Fennimore believes it is justified — and he suggested that Luminar may choose to send more letters like this in the future.
“When someone raises valid and thoughtful concerns about us, we want to respond with valid and thoughtful facts,” Fennimore told CNBC. “Because I think the capital markets depend on having a good and factual debate.”
