LAZR stock price plunged: Do Luminar’s risks outweigh rewards?

Luminar (BMV: LAZR) stock price has been in a freefall in 2023 as concerns about the company continued. The shares have plunged to a record low of $2.50, which was over 95% below the highest point on record. This plunge has brought its total market cap to about $1 billion.

Volvo delays remain

Luminar is one of the biggest companies in the light detection and ranging (Lidar) industry. The company has spent the last decade researching and building these devices with the goal of improving road safety around the world.

Luminar’s technology, unlike that offered by companies like Cruise, is not intended to replace a driver. Instead, its goal is to complement drivers and help them avoid accidents and other incidents.

Luminar is working with large Original Equipment Manufacturers (OEMs) like Volvo, Polestar, and Daimler to provide its iris and sensor software. Its top ten customers account for more than 67% of total sales.

The biggest challenge for Luminar is that it is dependent on a few large OEM companies. As a result, a major issue in one OEM can have outsized impacts on the company. We saw this recently with Volvo, which delayed the production of its EX90 vehicle.

EX90 is an electric SUV that has up to 363 range and a horsepower of 517. The company hopes to manufacture and release the vehicle in the second quarter of 2024. The other challenge is that the automobile industry is expected to go through a challenging period in 2024.

Competition is growing at an exponential rate as the number of auto companies jump. In the United States, we have companies like Lucid, Rivian, Fisker, and Tesla that are pure-play EVs. Traditional EVs like  Honda, Toyota, GM, and Ford are also building EVs and ICE vehicles.

All this means that the number of Luminar devices sold could be lower than its guidance. Luminar expects that its order book will rise from about $1 billion in 2023 to over $60 billion. 

Luminar will be an unprofitable company for a while. In the past five quarters, the company has lost over $682 million. This loss-making will continue as the company plans to ramp up its production. LAZR has over $321 million in cash and short-term investments, meaning that it could raise additional cash in 2024.

Luminar stock price forecast

LAZR chart by TradingView

Turning to the daily chart, we see that the LAZR share price has been in a freefall in the past few months. In this period, the stock has remained below the 50-day moving average. The Relative Strength Index (RSI) has moved to above the oversold point of 30.

Therefore, technically, the shares will likely continue falling in the coming weeks as investors wait for the next catalyst. However, from a risk-reward perspective, I suspect that the stock will bounce back in 2024. If this happens, the shares will likely rebound to $3.93, the lowest swing on January 23rd. This price is about 56% above the current level.