A Mercedes-Benz van retrofitted with various types of lidar systems, including Luminar’s Iris to demonstrate the differences in technologies.
Michael Wayland/CNBC
Lidar maker Luminar Technologies, hit by a recent Wall Street downgrade, is responding in an unusual way: taking its case straight to shareholders.
In a letter seen by CNBC on Friday morning, Luminar CFO Tom Fennimore – himself a former Goldman Sachs executive – challenges arguments made in a bearish note by Goldman analyst Mark Delaney earlier this week.
Delaney on Tuesday afternoon lowered Goldman’s rating on Luminar from “hold” to “sell,” arguing that its shares are overpriced relative to its key competitors and that Luminar’s own price assumptions are unrealistically high.
Luminar’s shares are down about 16% since Delaney’s note was published.
“We continue to see Luminar as one of a select few leaders in the very competitive lidar industry,” Delaney wrote. “However, we see a downside in the company’s margin prospects as the company is targeting ~$1,000 in revenue per vehicle, 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 only a few lidar makers to win deals with major automakers, he believes Luminar won’t be able to get the prices it’s hoping from those automakers. And based on 2025 sales assumptions, he expects Luminar to trade at four times the valuation of rivals Innoviz and Hesai, both of which have also won orders from automakers.
Fennimore argues that Delaney missed two important 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: this is the pricing that we actually have,” Fennimore said in an interview with CNBC on Friday morning.
Fennimore’s letter notes 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 secure pricing throughout the lifetime of these upcoming models, he said.
“‘Premium pricing’ is not a theoretical concept that we are forecasting, but an achievement that we have already made in our wholesale contracts,” Fennimore wrote in the shareholder letter.
And the second point Fennimore missed, according to Goldman: The time frame Delaney chose to compare Luminar’s valuation to that of its peers.
“We believe that using 2025 sales as a benchmark dramatically undervalues Luminar compared to peers, given that many of the 20+ vehicle lines we have won are not expected to reach production until after 2025,” he wrote.
Put another way, some of the big deals Luminar has already signed won’t generate significant revenue until those vehicles hit the market in the second half of the decade, Fennimore said.
The decision to address the rebuttal directly to Luminar shareholders is unusual, but Fennimore believes it is warranted — and he hinted Luminar may 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 that the capital markets depend on a good and factual debate.”