Austin Russell, founder and CEO of lidar startup
is not pleased that his company's shares have fallen 86% from a record high. And he's a little at a loss as to how the market has been behaving
Share. He shouldn't be.
Sharp declines don't mean investors should forget about lidar stocks. Luminar (stock exchange: LAZR) is a leader in automotive lidar, which is essentially laser-based radar that can act as a pair of eyes for a car's advanced driver assistance systems, allowing a vehicle to perform many everyday driving tasks while also Improve overall driving safety.
As cars become more advanced, there is strong growth in lidar. Wall Street expects Luminar sales to surpass $1 billion in 2026 and sales to surpass $2.3 billion in 2028. Revenue in 2022 was approximately $41 million.
That's some growth. “That's the part that's overwhelming … we're at a fifth to a tenth ours [value] “As of 2020, but we've hit every single milestone,” Russell said Barrons at an interview just outside
Car conference in Manhattan last week. “Of course there are macroeconomic implications and interest rates, but our growth has accelerated.”
He has an argument. Luminar's revenue in 2022 increased about 28% compared to 2021. Wall Street is forecasting $87 million in revenue for 2023, up more than 110% in one year.
However, growth isn't enough to kickstart a stock, and a few things have weighed on Luminar stock since it hit $47.80 in December 2020.
First are the expectations. While Luminar managed to beat its internally generated revenue guidance of $35 million in 2022, the company projected that it would generate approximately $124 million in revenue in 2023. That's about a 30% gap from Wall Street's forecast of $87 million.
However, Luminar stock, which closed at $6.87 on Friday, is down more than 30%. Other things must weigh on stocks.
One of those things is the interest rates Russell quoted. Rising interest rates are hitting start-up stocks harder than most for two reasons. First, most startups need money to fund their business. Higher rates mean financing becomes more expensive. Higher interest rates are also affecting the valuations of growth companies, which generate most of their cash flow well into the future. This cash is worth less when discounted at higher interest rates.
There's also the bubble factor. The stock market is prone to bubbles because investors despise watching others make a quick buck.
SPAC related stocks were in a bubble in late 2000. Luminar's SPAC merger was valued at $10 for the shares. They were up about 370% in a month at the end of 2020, leaving the shares worth about 650 times 2021 sales.
Luminar stock may have been overpriced, but it's held up better than most lidar stocks. Lidar peer shares
(OUST) are down about 97% from record highs also set in December 2020.
That's probably not much of a consolation to Russell.
and Luminar now needs revenue. They could come. Luminar expects to be gross profit positive by the end of 2023, said Ouster CEO Angus Pacala Barrons at the Deutsche Bank car conference that his company would present a long-term financial model that would show concrete, realistic financial targets.
Ouster recently completed its merger with its lidar maker Velodyne. That deal, which struck in February, was essentially aimed at doubling revenue based on employees and expenses.
Positive gross earnings and new financial targets could boost both stocks later in 2023. By how much, of course, cannot be predicted.
Write to Al Root at [email protected]