Summary
Luminar announced plans to repurchase $250 million worth of stock along with planned insider purchases.
Oddly, the company sold at least $550 million worth of convertible debt to fund the buybacks.
The stock trades at over 7x ’25 sales targets, suggesting now isn’t the time for aggressive share buybacks while borrowing cash.
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JHVEPhoto/iStock Editorial via Getty Images Over the last few weeks, a few Lidar sensor companies have made moves to raise funds including valuation leader Luminar Technologies ( LAZR ). The sector is far more appealing now after a year of several companies being public with the market making progress towards production goals. My investment thesis remains Neutral on the stock despite the sector tipping towards material sales as the stock remains richly valued. Building Backlog
Luminar became a public story back in 2020 when the company was hardly producing sales. For Q3’21, revenues grew 89% to $8.0 million and the company forecast Q4’21 revenues to reach at least $10.4 million and up to $13.4 million. Source: Luminar Tech. Q3’21 presentation
The Lidar sensor company is predicting revenues to top $30.0 million while the backlog hits the 60% growth target for 2021 to reach $1.8 billion. As these companies gain commercial momentum, the market will return to investing based on more comfort around these large backlogs.
Luminar has announced several new major deals with NVIDIA ( NVDA ) and Polestar ( GGPI ) in the automotive space along with commercial wins in AV trucking with Embark ( EMBK ) and Kodiak Robotics . The company has announced 6 major commercial wins so far this year.
On the flip side, Luminar will burn ~$140 million of cash this year. The company spent $38 million during Q3’21 with a forecast to burn another $42 million in Q4’21.
The Lidar sensor company had forecast ending 2021 with a cash balance of ~$486 million. The cash balance is starting to burn fast after the initial fund raising with the SPAC deal.
The revenue picture actually remains above the original forecast of Luminar. The company isn’t expecting to see much growth next year (appears conservative) with the eventual revenue ramp in 2023 leading to over $400 million in 2024 sales. The analysts are probably conservative with the 2024 revenue targets below $400 million here. The stock valuation should start being based more on the order book. The market will stop questioning the validity of these numbers as projects are awarded and start moving forward with production plans.
Luminar ended 2020 with a $1 billion order book and now forecasts the amount reaching $1.6 billion in 2021. The ultimate goal was for the forward-looking order book to reach ~$10 billion in 2025. An investor has the option to value the stock based on the current revenue base, projected revenue base or the backlog. Insider Purchases With A Catch
Insiders always think they know more about how the market should value a stock than the market itself. Sometimes the executives are exactly correct, but a lot of times executives using debt are taught a tough lesson by the market.
Back on December 14, Luminar announced a plan for an authorization to repurchase $250 million worth of stock. The company along with several executives and board members were set to buy cheap shares of the stock.
Luminar Founder and CEO Austin Russell made the following statement about the share buybacks in the announcement: Given our current position and our trajectory, we think our stock price has not reflected the wins and successes we’ve had over the past year since our public debut, with substantial inefficiency in the market. Today, we’re putting our money where our mouth is by executing this significant purchase of shares as we accelerate our industry leadership. The move came with a massive catch considering Luminar is burning cash to build the business for the launch of autonomous vehicles in the 2024/25 timeframe. The company stated the buyback plans were reliant on a proposed private financing transaction.
While the CFO bought 16K shares, Luminar announced the pricing of an upsized $550 million 1.25% convertible senior notes offering. The overallotment amount will likely push the convertible debt offering to $625 million.
The company raised cash far beyond the amount needed to fund a $250 million share buyback. As mentioned above, Luminar was already watching the cash balance drip lower, but investors probably didn’t want to see a debt offering hanging over the […]
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