Goldman Sachs says this self-driving car software stock could fall 35%

Published Wed, Mar 22 20238:21 AM EDT

Luminar Technologies shares are too expensive at current valuations and could fall 35%, Goldman Sachs said. Analyst Mark Delaney downgraded the tech company to sell from neutral, saying the developer of vision-based lidar and machine perception technologies for self-driving cars has a premium valuation and will face greater margin pressure. "We continue to see Luminar as one of a handful of leaders in the very competitive lidar [light detection and ranging] industry (an industry that has numerous merchant lidar providers, and many AV companies also have in-house lidar technology), as evidenced by design wins with several companies in the ADAS/AV ecosystem," Delaney said to clients in a Tuesday note. "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 price] roughly 50-100% higher than key competitors for MEMs/solid state lidar," Delaney added. LAZR 1D mountain Luminar Technologies shares 1-day The higher selling price could hurt the stock as Luminar faces stiff competition in the autonomous vehicle sector, meaning that the company could miss its own gross margin targets, according to the analyst. "While Luminar attributes this higher ASP in part to software, and we believe it has some opportunities in this regard, the market for ADAS/AV software is highly competitive and we believe both underlying hardware gross margins, and the tailwind from software, could be lower than the company targets (Luminar targets a long term non-GAAP EBIT margin of 35-40+%)," read the note. "Moreover, we believe that current valuation is expensive (Luminar is trading at ~4X EV/2025 revenue vs. Innoviz and Hesai at ~1X even though we believe these competitors also have meaningful customer traction)," the note continued. Luminar shares outperformed this year as investors moved back into riskier assets. The stock surged 56% in 2023, following a 70% drop in 2022. The stock closed Tuesday at $7.73 per share. However, the analyst says Luminar shares now have downside after that run-up. Delaney's $5 price target means shares could fall 35% from Tuesday's close. Meanwhile, peers in Delaney's coverage group have a median of 14% upside, according to the note. Luminar shares were down more than 8% in Wednesday premarket trading. — CNBC's Michael Bloom contributed to this report.