A Mercedes-Benz van fitted with various lidar systems, including Luminar’s Iris, to showcase the difference in technology.
Michael Wayland/CNBC
Lidar maker Luminar Technologiesstung by the recent Wall Street downgrade, responded in an unusual way: taking the case directly to shareholders.
In a letter seen by CNBC on Friday morning, Luminar CFO Tom Fennimore – himself a former managing director of Goldman Sachs – took issue with the arguments made in the bearish note by Goldman analyst Mark Delaney earlier this week.
Delaney on Friday afternoon cut Goldman’s rating on Luminar to sell, from hold, arguing that the shares are overpriced relative to key competitors and that Luminar’s own price perception is unrealistically high.
Luminar shares have fallen about 16% since Delaney’s note was published.
“We continue to see Luminar as one of the few leaders in the 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 reflects ASP. [average selling prices] approximately 50-100% higher than our main competitors.”
Simply put, while Delaney admits that Luminar is one of the few lidar manufacturers that has won deals with major automakers, he thinks that Luminar won’t be able to get the price the automaker wants. And based on 2025 revenue assumptions, he sees Luminar trading at four times the value of its competitors. Innoviz and Hesai, both of which have also won business from automakers.
Fennimore said Delaney missed two important points.
“One, our technology is better, and people usually pay a premium for technology, but for us it’s not a theoretical exercise: It’s the right price,” Fennimore told CNBC in an interview on Friday morning.
Fennimore’s letter indicates that Luminar has signed contracts to supply hardware and software for more than 20 new vehicles coming from major automakers including Volvo, Polestar, Mercedes-Benz and Chinese auto giant SAIC Motor. The contract locks in the price for the life of the future model, he said.
“‘Premium pricing’ is not a theoretical concept envisioned, but an achievement that has been made in key customer contracts,” Fennimore wrote in a shareholder letter.
And the second point Fennimore says Goldman missed: The time frame Delaney chose to compare Luminar’s value to its competitors.
“We believe that using 2025 revenue as a valuation benchmark versus peers dramatically underestimates Luminar, as many of the 20+ vehicle lines it has been awarded are not expected to reach production until beyond 2025,” he wrote.
Put another way, some of the big contracts Luminar has signed won’t generate significant revenue until the vehicles are launched in the second half of the decade, Fennimore said.
The decision to take a direct rebuttal to Luminar shareholders is unusual, but Fennimore believes it is warranted – and hinted that Luminar may choose to send more letters like this in the future.
“When someone raises a valid and thoughtful concern about us, we want to respond with truthful and thoughtful facts,” Fennimore told CNBC. “Because I think capital markets rely on good, factual debate.”