Automotive technology stock Luminar Technologies, Inc. (LAZR - Get Rating) was an investor favorite when the stock market was on a bull run following the pandemic-led plunge. The company enables solutions for series production passenger cars and commercial trucks. The provider of lidar technology operates under two segments: Autonomy Solutions and Components.

However, since the stock market has been battling several macroeconomic and geopolitical headwinds since the beginning of this year, LAZR has gotten hammered due to concerns over its weak financials.

Surprisingly, LAZR recently witnessed unusual options activity. Over 25,000 call options were traded on October 18, indicating bullish investor sentiment.

The company failed to surpass the consensus EPS estimates in the last reported quarter. However, it beat the consensus revenue estimate by 17.5%. Moreover, the company raised its fiscal year 2022 revenue outlook to $40-$45 million from the $40 million estimated earlier.

Shares of LAZR have declined 56.3% in price year-to-date and 52.2% over the past year to close the last trading session at $7.39. It is trading 69% below its 52-week high of $23.90, which it hit on November 9, 2021.

Here’s what could influence LAZR’s performance in the upcoming months:

Weak Financials

LAZR’s non-GAAP net loss widened 134.7% year-over-year to $65.03 million for the second quarter ended June 30, 2022. Its non-GAAP loss per share widened 125% year-over-year to $0.18. The company’s non-GAAP operating expenses increased 86% year-over-year to $51.58 million. Also, its non-GAAP gross loss widened significantly to $10.91 million.

Mixed Analyst Estimates

LAZR’s EPS for fiscal 2022 and 2023 is expected to remain negative. Its revenue for fiscal 2022 and 2023 is expected to increase 37.6% and 181% year-over-year to $43.97 million and $123.59 million, respectively.

Stretched Valuation

In terms of forward EV/S, LAZR’s 60.31x is significantly higher than the 1.05x industry average. Likewise, its 60.42x forward P/S is significantly higher than the 0.82x industry average. Its 29.83x trailing-12-month P/B is significantly higher than the 1.99x industry average.

Weak Profitability

LAZR’s trailing-12-month gross profit margin is negative compared to the 36.42% industry average. Likewise, its trailing-12-month levered FCF margin is negative compared to the 1.69% industry average. Also, its 0.05% trailing-12-month asset turnover ratio is 94.8% lower than the 1.03% industry average.

POWR Ratings Reflect Bleak Prospects

LAZR has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. LAZR has an F grade for Value, in sync with its stretched valuation.

It has an F grade for Quality, consistent with its weak profitability. In addition, LAZR’s 1.56 beta justifies its F grade for Stability.

LAZR is ranked last out of 65 stocks in the Auto Parts industry. Click here to access LAZR’s ratings for Growth, Momentum, and Sentiment.

Bottom Line

LAZR is on a downtrend, trading below its 50-day and 200-day moving averages of $8.55 and $10.82, respectively. As the Fed continues its aggressive rate hikes, the company is expected to remain under pressure in the upcoming months.

Despite the unusual call options buying witnessed on October 18, we think it could be wise to avoid the stock now, given its weak financials, stretched valuation, and weak profitability.

How Does Luminar Technologies, Inc. (LAZR) Stack Up Against Its Peers?

LAZR has an overall POWR Rating of F, equating to a Strong Sell rating. Therefore, one might want to consider investing in other Auto Parts stocks with an A (Strong Buy) or B (Buy) rating, such as Ituran Location and Control Ltd. (ITRN - Get Rating), LKQ Corporation (LKQ - Get Rating), and BorgWarner Inc. (BWA - Get Rating).

LAZR shares were trading at $7.20 per share on Wednesday morning, down $0.19 (-2.57%). Year-to-date, LAZR has declined -57.42%, versus a -21.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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