A Mercedes-Benz van equipped with several types of lidar systems, including Luminar’s Iris, to indicate the differences in technology.
Michael Wayland / CNBC
Lidar producer Lighting technologieshit by Wall Street’s recent downgrade, he’s reacting in an unusual way: by taking the matter on to shareholders.
In a letter seen by CNBC Friday morning, Luminar CFO Tom Fennimore – who was himself a former Goldman Sachs managing director – disagrees with arguments made in a bearish note by Goldman analyst Mark Delaney earlier this week.
Delaney downgraded Goldman’s suggestion for Luminar to sell from hold on Tuesday afternoon, arguing that its shares were overvalued relative to key competitors and that Luminar’s own pricing assumptions were unrealistically high.
Luminar shares have fallen about 16% because the Delaney memo was released.
“We proceed to view Luminar as certainly one of the few leaders within the highly competitive lidar industry,” Delaney wrote. “Nonetheless, we see a deterioration in the corporate’s margin prospects as the corporate targets a revenue per vehicle of ~$1,000, which we consider implies an ASP [average selling prices] roughly 50-100% higher than key competitors.
Simply put, while Delaney admits Luminar is certainly one of the few lidar makers to win deals with major automakers, he thinks Luminar won’t give you the option to get the prices he hopes to get from those automakers. Based on 2025 revenue assumptions, believes Luminar trades 4 times its competitor’s valuation Innoviz and Hesai, each of which also won business from automakers.
Fennimore says Delaney missed two key points.
“First, our technology is healthier, and people normally pay a premium for the technology, but for us, this isn’t a theoretical exercise: these are the prices we even have on the bottom,” Fennimore told CNBC on Friday morning.
Fennimore’s letter indicates that Luminar has already signed contracts to provide hardware and software for greater than 20 upcoming latest vehicles from major automakers including Volvo, Polestar, Mercedes-Benz and Chinese auto giant SAIC Motor. He said these contracts lock in prices for the lifetime of those upcoming models.
“Premium Pricing” isn’t a theoretical concept that we forecast, but an achievement that now we have already achieved through our major customer contracts,” Fennimore wrote in a letter to shareholders.
And the second point Fennimore talks about with Goldman: the time-frame Delaney selected to match Luminar’s valuation with that of its rivals.
“We consider that using 2025 revenue as a benchmark for pricing in comparison with peers drastically underestimates the Luminar as lots of our 20+ award-winning vehicle lines won’t go into production until after 2025.” – he wrote.
In other words, a number of the big contracts Luminar has already signed won’t generate significant revenue until those vehicles are launched within the second half of the last decade, Fennimore said.
The choice to handle the objection on to Luminar shareholders is unusual, but Fennimore believes it’s justified – and has hinted that Luminar may determine to send more such letters in the long run.
“Each time someone raises a legitimate and thoughtful concern about us, we would like to reply with valid and thoughtful facts,” Fennimore told CNBC. “Because I feel capital markets are all about good and factual debate.”