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 the shareholders.
In a letter seen by CNBC on Friday morning, Luminar CFO Tom Fennimore – himself a former Goldman Sachs managing director – 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 its shares are overpriced relative to key competitors and that Luminar’s own pricing assumptions are unrealistically high.
Luminar’s shares have fallen about 16% since Delaney’s note was published.
“We continue to see Luminar as one of a handful of leaders in the very competitive lidar industry,” Delaney wrote. “However, we see downside to the company’s margin outlook with the company targeting revenue per vehicle of ~$1k which we believe implies ASPs [average selling prices] roughly 50-100% higher than key competitors.”
Simply put, while Delaney acknowledges that Luminar is one of only a few lidar makers winning deals with major automakers, he thinks that Luminar won’t be able to get the prices it’s hoping 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 missed two key points.
“One, our tech is better, and people typically pay a premium for tech, but to us this isn’t a theoretical exercise: This is pricing that we actually have in place,” Fennimore told CNBC in an interview on Friday morning.
Fennimore’s letter points out that Luminar has already signed contracts to provide 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 pricing through the life of those upcoming models, he said.
“‘Premium pricing’ isn’t a theoretical concept we are forecasting, but an achievement we have already made 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 against those of its rivals.
“We believe using 2025 revenue as a valuation benchmark versus peers dramatically undervalues Luminar, as many of the 20+ vehicle lines we have been awarded are not expected to reach production until beyond 2025,” he wrote.
Put another way, some of the big contracts that 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’s warranted – and he hinted that Luminar might choose to send more letters like this in the future.
“Whenever anybody 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 rely on having a good and factual debate.”