Is Velodyne or Luminar Stock The Better Bet On The Self-Driving Market?
Velodyne Lidar (NASDAQ: VLDR) and Luminar Technologies (NASDAQ: LAZR), two companies that specialize in lidar technology, went public this year. Lidar – a laser-based technology, which essentially helps computers detect surrounding objects – is poised to grow meaningfully, driven by the broader adoption of self-driving cars, helping both companies. However, the two stocks are valued rather differently. While Luminar’s market cap stands at roughly $10 billion, trading at over 350x projected 2021 revenue, Velodyne – which is actually the more established player in the lidar market – is valued at under $4 billion, or a P/S multiple of about 25x. Let’s take a look at the two companies’ businesses to understand what’s driving the disparity in their valuation and which could be the better pick.
See our dashboard analysis Velodyne Vs. Luminar: Which Lidar Stock Should You Pick? for an overview of the two companies’ valuation and fundamental performance in recent years.
Luminar’s Tech Hits The Sweetspot For Mass Market
Velodyne has largely focused on high-performance, high-cost lidar sensors. The company’s sensors (such as the 360-degree units that are placed on a vehicle roof) are typically used in prototype self-driving cars and other relatively lower volume applications such as research and development. Based on cumulative shipments and revenue data from the company’s form S-1, its sensors cost an average of $14k per unit. The company posted revenues of over $100 million in 2019, down from about $142 million in 2018, due to lower average selling prices and a larger mix of lower price sensors sold.
Luminar, on the other hand, is focused on building sensors that can be used in mass-market vehicles. The company’s sensors are expected to hit the sweet spot for automakers, costing under $1,000 per unit while offering very strong performance relative to their price. For example, Luminar claims its lidar has an industry-leading viewing range of 250 meters. The company is focusing on signing large long-term deals, noting that it has partnered with 50 companies, including 7 of the top 10 global auto players. Volvo’s next-gen electric vehicle, estimated to launch in 2022, will likely be the first consumer vehicle to use Luminar’s high-performance lidar system.
What Are The Risks?
While Luminar’s differentiated technology and promise of low costs are encouraging, there are risks. The company has yet to begin volume production and there could be challenges as it scales up. For perspective, Luminar noted that it expects to sell just 100 lidar sensors in 2020 and the consensus Revenues estimates for the company stand at just about $15 million this year. Separately, Velodyne also appears to be eyeing Luminar’s turf with new sensors that are cheap enough for the mass market. The company recently unveiled a new sensor called H800, which can see up to 200 meters and can apparently be mass-produced for as little as $500. Luminar’s high valuation, the increasing competition, and potential challenges surrounding its production ramp could make its stock the riskier bet at this point, although its upside could also be higher.
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