A Mercedes-Benz van retrofitted with different types of lidar systems, including Luminar’s Iris, to show 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: going straight to shareholders.
In a letter seen by CNBC Friday morning, Luminar CFO Tom Fennimore — himself a former director of Goldman Sachs — addresses the arguments made earlier this week in a bearish note by Goldman analyst Mark Delaney.
Delaney lowered Goldman’s rating on Luminar to sell, from like, on Tuesday afternoon, arguing that its stock is too expensive compared to its main competitors and that Luminar’s own price assumptions are unrealistically high.
Shares of Luminar are down about 16% since Delaney’s note was published.
“We continue to view Luminar as one of the few leaders in the highly competitive lidar industry,” Delaney wrote. “However, we are seeing a downside to the company’s margin outlook with the company targeting revenue per vehicle of ~$1k, which we believe implies ASPs [average selling prices] about 50-100% higher than the main competitors.”
Simply put, while Delaney acknowledges that Luminar is one of the few lidar manufacturers to have won deals with major automakers, he doesn’t think Luminar will 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 competitors Innoviz and Hesai, both of which have also won business from automakers.
Fennimore argues that Delaney overlooked two important points.
“First of all, our technology is better, and people typically pay a premium for technology, but for us this isn’t a theoretical exercise: this is pricing that we’re actually doing,” 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 more than 20 upcoming new vehicles from major automakers, including Volvo, Polestar, Mercedes-Benz and Chinese auto giant SAIC Motor. Those contracts hold the price for the life of those upcoming models, he said.
“‘Premium pricing’ is not a theoretical concept that we predict, but an achievement that we have already achieved in our large client contracts,” Fennimore wrote in the shareholder letter.
And the second point Goldman missed, according to Fennimore: the time frame Delaney chose to compare Luminar’s valuation to that of its rivals.
“We believe that using 2025 sales as a valuation benchmark relative to peers dramatically undervalues Luminar as many of the 20+ vehicle lines we have been given are not expected to enter 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 submit the rebuttal directly to Luminar shareholders is unusual, but Fennimore believes it is justified – and he hinted that Luminar could choose to send more letters like this in the future.
“Whenever 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 a good and factual debate.”
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