Luminar Stock: Buy, Sell, or Hold After Earnings?

Valued at a market cap of $518 million, Luminar Technologies (LAZR) is an automotive company that provides sensor technologies and software for passenger cars and commercial trucks in the U.S. and internationally. It has two business segments: Autonomy Solutions designs, manufactures, and sells laser imaging, detection, and ranging sensors, as well as autonomy software for original equipment manufacturers (OEMs) in sectors such as automobile, commercial vehicle, and robotaxi; while the Component business develops pixel-based sensors. 

LAZR also designs, tests, and provides consulting services for integrated circuits (ICs) used in sectors such as aeronautics and defense. 

The company went public in March 2019, and LAZR stock surged to a record high in late 2020. Today, Luminar stock trades 98% below all-time highs, allowing you to buy the dip. 

Let’s see how Luminar performed in Q3, and whether it is a good investment. 

Is Luminar Stock a Good Buy?

In Q3 of 2024, Luminar reported revenue of $15.5 million, below estimates of $19.1 million. During its last earnings call, Luminar forecast sales in the September quarter to be flat to slightly higher from Q2 revenue of $16.5 million. It reported an adjusted loss of $0.16 per share, which was in line with estimates. 

The company attributed its tepid performance in Q3 to higher inventory levels due to “unfavorable economics” and contract manufacturing charges tied to a slower ramp-up in production. Due to recently announced business contracts, Luminar expects revenue to grow “moderately” in the current quarter compared to Q3. 

Specifically, Luminar announced that a major Japan-based OEM expanded its advanced development contract, in addition to the paid development of innovative software capabilities. Notably, Luminar was selected by Volvo(VLVLY) as a standard equipment supplier for several vehicles, including the Volvo EX90. 

Management added that production downtime in Q4 will help it lower inventory levels. The downtime will also allow the company to better align with Volvo’s production rate. Coupled with its cost savings initiatives, Luminar expects its net loss to decline significantly from Q3. 

Is Luminar Stock Overvalued?

While the current macro economy has been challenging for automobile manufacturers, Luminar has delivered noteworthy customer wins. For instance, it delivered more LiDAR (light detection and ranging) products to all customers in Q3 than in the prior three quarters combined. 

Luminar’s founder and CEO, Austin Russell, stated, “The broader automotive industry is coming through a seismic shift as they embark on creating new vehicle platforms to support next-generation assisted and autonomous driving tech, including LiDAR and represents one of the biggest upheavals in the industry for decades.”

As Luminar continues to scale, it must deploy significant resources to expand its manufacturing capabilities. The company ended Q3 with $200 million in cash, while its free cash outflow stood at $272 million in the last 12 months. Given its current cash burn rate, Luminar will likely be forced to raise additional equity capital within the next 12 months, diluting existing shareholder wealth in the process. 

In the last 12 months, Luminar has increased its sales by 27.6% yearly to $75 million, up from $40.7 million in 2022 and $12.6 million in 2019. Priced at 7.6x trailing sales, Luminar stock is quite expensive, considering it remains unprofitable. 

Out of the 10 analysts covering LAZR stock, five recommend “strong buy,” three recommend “hold,” one recommends “moderate sell,” and one recommends “strong sell.” The average target price for LAZR is $3.50, indicating an upside potential of over 230% from current levels.