Luminar stock price has crashed amid lingering concerns about its growth and management challenges. LAZR was trading at $4.17 on Tuesday after falling by 8% from the day before. It has become a fallen angel as its stock plunged by almost 100% from its all-time high, bringing its market cap from $14 billion to $173 million.
Why Luminar stock price continues to crash
For starters, Luminar is a technology company that builds light detection and ranging (LiDAR) solutions for the automotive industry. Its technology helps automakers develop autonomous vehicles without investing for many years in R&D.
The Lidar industry is a growing one now that many companies are expected to implement these autonomous systems in the next few years.
However, it is also a highly competitive industry, with companies like Hesai, Velodyne, Innoviz, and Leica Geosystems building products. Therefore, companies that will succeed will need to have superior products, good pricing, and deals with top automakers.
Luminar Technologies has inked partnership deals with some of the top companies in the automobile industry lik Volvo, Tesla, and Toyota. Its technology focuses on long-ranfe, high-resolution sensors and perception software.
Luminar stock price has crashed for several reasons. First, the company is implementing the second round of layoffs as the restructuring continues on the back of weak sales growth and profitability. The new layoffs will cost the company between $4 million and $6 million.
Luminar has been slashing costs for a while. Its operating expenses dropped from $73 million in Q1’24 to $45 million in Q1’25. This trend has also reduced the share-based compensation from $44 million to $19 million.
Management issues
Second, the company recently replaced Austin Russell, its CEO and Chairman, a sign that there are boardroom issues. In the filing, the management said that he resigned because of an ethics inquiry. Jun Hong Heng, a board member also resigned after Russell’s firing.
Third, the company has been highly dilutive, which explains why the number of outstanding shares have soared in the past few years. The firm had 15 million outstanding shares in 2021, a figure that has jumped to 36.6 million today.
Dilution is one of the worst things that can happen to a shareholder because the new issues reduce their ownership. The company did this dilution because it was not making any money for a long time.
LAZR stock price also crashed after the company published weak earnings. Its revenue dropped by 10% YoY and 16% QoQ, a sign that demand was relatively weak. It had a loss of $8.1 million.
Luminar expects that its annual revenue this year will grow by 10%, a small number for a company that should be ramping up its production. A key risk is that most of its revenue is now coming from Volvo, a big challenge if the latter decides to use alternative companies.
LAZR stock price analysis
LAZR stock chart | Source: TradingView
The LAZR stock price looks cheap at face value as it trades at $4.7. This is a big decline for a stock that was once trading at over $400.
It remains much lower than all moving averages, while its volume has thinned. The most likely scenario is where the downtrend continues in the coming years as its challenges continue.
However, shorting Luminar is also risky because of the costs of borrowing shares. Also, the company has a short interest of 21.3%, exposing it to regular short squeezes as we saw with companies like GameStop and AMC a few years ago.
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